Approximately $172.6 Million of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of five classes,
confirmed two classes and affirmed six classes of LB-UBS Commercial
Mortgage Trust 2000-C5, Commercial Mortgage Pass-Through
Certificates, Series 2000-C5 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Dec 21, 2000 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Dec 21,
2000 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Sep 14,
2005 Upgraded to Aaa (sf)
Cl. C, Confirmed at Aaa (sf); previously on Sep 2,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. D, Confirmed at Aa3 (sf); previously on Sep 2,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Baa1 (sf); previously on Sep 2,
2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to B1 (sf); previously on Sep 2,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to Caa3 (sf); previously on Sep 2,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to C (sf); previously on Sep 2,
2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to C (sf); previously on Sep 2,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. K, Affirmed at C (sf); previously on Sep 2,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Mar 11,
2009 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Dec 21,
2006 Downgraded to C (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans, interest shortfalls and concerns about loans approaching
maturity in an adverse environment. Seventeen loans, representing
62% of the pool, have either matured or mature within the
next six months and have a Moody's stressed debt service coverage
ratio (DSCR) less than 1.0X.
The confirmations and affirmations are due to key parameters, including
Moody's loan to value (LTV) ratio, the Herfindahl Index (Herf) and
Moody's stressed DSCR, remaining within acceptable ranges.
Based on our current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their current
ratings.
On September 2, 2010, Moody's placed seven classes on review
for possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of 21.8%
of the current balance. Moody's stressed scenario loss is 29.1%
of the current balance. Moody's provides a current list of base
and stress scenario losses for conduit and fusion CMBS transactions on
moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for investment grade classes could decline below the current levels.
If future performance materially declines, the expected level of
credit enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key parameters
may indicate that the collateral's credit quality is stronger or weaker
than Moody's had anticipated during the current review. Even so,
deviation from the expected range will not necessarily result in a rating
action. There may be mitigating or offsetting factors to an improvement
or decline in collateral performance, such as increased subordination
levels due to amortization and loan payoffs or a decline in subordination
due to realized losses.
Primary sources of assumption uncertainty are the current stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in the industrial,
office, and retail sectors. Hotel performance has begun to
rebound, albeit off a very weak base. Multifamily has also
begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010 and 2011;
we expect overall a sluggish recovery in most of the world's largest economies,
returning to trend growth rate with elevated fiscal deficits and persistent
unemployment levels.
The principal methodologies used in this rating were "CMBS: Moody's
Approach to Rating Fusion Transactions" published in April 2005 and "CMBS:
Moody's Approach to Rating Large Loan/Single Borrower Transactions" published
in July 2000.
In addition to methodologies and research available on moodys.com,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
Moody's review incorporated the use of the excel-based CMBS Conduit
Model v 2.50 which is used for both conduit and fusion transactions
as well as the excel-based CMBS Large Loan Model v. 8.0
which is used for Large Loan transactions. Conduit model results
at the Aa2 level are driven by property type, Moody's actual and
stressed DSCR, and Moody's property quality grade (which reflects
the capitalization rate used by Moody's to estimate Moody's value).
Conduit model results at the B2 level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's Herfindahl
score (Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be considered
in our analysis. Based on the model pooled credit enhancement levels
at Aa2 and B2, the remaining conduit classes are either interpolated
between these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the
credit enhancement for loans with investment-grade credit estimates
is melded with the conduit model credit enhancement into an overall model
result. Fusion loan credit enhancement is based on the underlying
rating of the loan which corresponds to a range of credit enhancement
levels. Actual fusion credit enhancement levels are selected based
on loan level diversity, pool leverage and other concentrations
and correlations within the pool. Negative pooling, or adding
credit enhancement at the underlying rating level, is incorporated
for loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan size,
where a higher number represents greater diversity. Loan concentration
has an important bearing on potential rating volatility, including
risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 6 compared
to 22 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.0 and then reconciles and
weights the results from the two models in formulating a rating recommendation.
The large loan model derives credit enhancement levels based on an aggregation
of adjusted loan level proceeds derived from Moody's loan level LTV ratios.
Major adjustments to determining proceeds include leverage, loan
structure, property type, and sponsorship. These aggregated
proceeds are then further adjusted for any pooling benefits associated
with loan level diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that considers both
quantitative and qualitative factors. Therefore, the rating
outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of quantitative
tools -- MOST® (Moody's Surveillance Trends) and CMM
(Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated March 11, 2009. Please
see the ratings tab on the issuer / entity page on moodys.com for
the last rating action and the ratings history.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past six months.
DEAL PERFORMANCE
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 83% to $172.6
million from $997.2 million at securitization. The
Certificates are collateralized by 23 mortgage loans ranging in size from
less than 1% to 30% of the pool, with the top ten
loans representing 84% of the pool. At securitization,
the Gallery at Harborplace Loan had an investment grade credit estimate.
However, due to a decline in property performance and increased
leverage, this loan is now analyzed as part of the conduit pool.
One loan, representing less than 1% of the pool, has
defeased and is collateralized with U.S. Government securities.
Seven loans, representing 54% of the pool, are on the
master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. Moody's has
assumed a high default probability for four of the watchlisted loans and
has estimated a $1.6 million loss (20% expected loss
based on a 50% default probability) from these troubled loans.
Eighteen loans have been liquidated from the pool, resulting in
an aggregate realized loss of $37.3 million (43%
loss severity overall). At last review the pool had experienced
aggregate losses totaling $27.2 million. Twelve loans,
representing 44% of the pool, are currently in special servicing.
The largest loan in special servicing is the River Plaza Loan ($24.3
million -- 14.0% of the pool), which is secured
by a 202,000 square foot office building located in downtown Stamford,
Connecticut. The property experienced a significant decline in
occupancy due to the largest tenant, which originally occupied 40%
of the premises, vacating in July 2008. The loan was transferred
to special servicing in March 2009 and is now real estate owned (REO).
The master servicer has recognized a $9.7 million appraisal
reduction for this loan.
The second largest loan in special servicing is the Bank Atlantic Building
Loan ($6.8 million -- 3.9% of the pool),
which is secured by a 81,402 square foot office building located
in Miami, Florida. The loan was transferred to special servicing
in December 2007 when the sole tenant left the property at the end of
its lease. The property remains 100% vacant. The
loan is now REO. The master servicer has recognized a $5.5
million appraisal reduction for this loan.
The third largest loan in special servicing is the Westway Shopping Center
Loan ($6.5 million -- 3.7% of the pool),
which is secured by a 220,010 square foot retail center in Wichita,
Kansas. The loan was transferred to special servicing in August
2010 due to the borrower failing to establish a required cash management
account. The property was 62% leased as of June 2010 compared
to 59% at last review.
The remaining specially serviced loans are secured by a mix of property
types and each represents less than 2% of the pool. The
master servicer has recognized an aggregate $4 million appraisal
reduction for three of the remaining specially serviced loans.
Moody's estimates an aggregate loss of approximately $32.5
million (45% expected loss on average) for the specially serviced
loans.
Based on the most recent remittance statement, Classes G through
Q have experienced cumulative interest shortfalls totaling $3.6
million. Moody's anticipates that the pool will continue
to experience interest shortfalls because of the high exposure to specially
serviced loans. Interest shortfalls are caused by special servicing
fees, including workout and liquidation fees, appraisal subordinate
entitlement reductions (ASERs) and extraordinary trust expenses.
Moody's was provided with full year 2009 operating results for 79%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 104% compared to 90% at
last review. Moody's net cash flow reflects a weighted average
haircut of 11% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 0.94X and 1.02X, respectively,
compared to 1.21X and 1.32X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual
debt service. Moody's stressed DSCR is based on Moody's NCF and
a 9.25% stressed rate applied to the loan balance.
The top three performing conduit loans represent 49% of the pool
balance. The largest loan is the Gallery at Harborplace Loan ($51.9
million -- 30.1% of the pool), which is secured
by a 403,000 square foot mixed use development situated in the Baltimore
Inner Harbor in downtown Baltimore, Maryland. The property
is also encumbered by a B-Note that is held outside the trust.
The office component (265,000 square feet) was 66% leased
as of March 2010 compared to 55% at last review. The retail
component (139,000 square feet) was 87% leased compared to
92% at last review. Property performance has declined significantly
since last review due to the decline in occupancy. The loan has
amortized 4% since last review. Moody's LTV and stressed
DSCR are 103% and 0.99X, respectively, compared
to 65% and 1.59X at last review.
The second largest loan is the Utica Park Place Shopping Center Loan ($27.8
million -- 16.1% of the pool), which is secured
by a 456,000 square foot retail center located in Utica, Michigan.
The center was 89% leased as of March 2010, the same as at
last review. The loan has been on the servicer's watchlist since
May 2009 for poor performance and low DSCR. Moody's considers
this loan to have a high default probability and has classified it as
a troubled loan. Moody's LTV and stressed DSCR are 119%
and 0.84X, compared to 114% and 0.88X at last
review.
The third largest loan is the 711 Executive Boulevard Loan ($5.3
million -- 3.1% of the pool), which is secured
by a 112,900 square foot industrial/warehouse property located in
Valley Cottage, New York. The property was 97% leased
as of December 2009 compared to 100% at securitization.
Property performance has been stable and the loan has amortized 3%
since last review. Moody's LTV and stressed DSCR are 56%
and 1.92X, respectively, compared to 57% and
1.88X at last review.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings; parties not involved in the ratings;
public information; confidential and proprietary Moody's investors
Service information; and confidential and proprietary Moody's
Analytics' information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Christie Edwards
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Downgrades Five, Confirms Two and Affirms Six CMBS Classes of LB-UBS 2000-C5
