Approximately $4.12 Billion of Structured Securities Affected
New York, March 10, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of five and
affirmed 19 classes of Goldman Sachs Mortgage Securities Corporation II,
Commercial Mortgage Pass-Through Certificates, Series 2006-GG8
as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Nov 8, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Nov 8, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Nov 8, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Nov 8, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Nov 8, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Nov 8, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at Aa3 (sf); previously on
Mar 25, 2010 Downgraded to Aa3 (sf)
Cl. A-J, Downgraded to Ba1 (sf); previously on
Mar 25, 2010 Downgraded to Baa3 (sf)
Cl. B, Downgraded to Ba2 (sf); previously on Mar 25,
2010 Downgraded to Ba1 (sf)
Cl. C, Downgraded to B2 (sf); previously on Mar 25,
2010 Downgraded to B1 (sf)
Cl. D, Downgraded to Caa1 (sf); previously on Mar 25,
2010 Downgraded to B3 (sf)
Cl. E, Downgraded to Caa2 (sf); previously on Mar 25,
2010 Downgraded to Caa1 (sf)
Cl. F, Affirmed at Caa3 (sf); previously on Mar 25,
2010 Downgraded to Caa3 (sf)
Cl. G, Affirmed at Ca (sf); previously on Mar 25,
2010 Downgraded to Ca (sf)
Cl. H, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. J, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. Q, Affirmed at C (sf); previously on Mar 25,
2010 Downgraded to C (sf)
Cl. X, Affirmed at Aaa (sf); previously on Nov 8,
2006 Definitive Rating Assigned Aaa (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 and higher credit quality dispersion.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), 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.
Moody's rating action reflects a cumulative base expected loss of 10.3%
of the current balance. At last full review, Moody's cumulative
base expected loss was 9.8%. Moody's stressed scenario
loss is 24.2% 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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011 The hotel and multifamily sectors are continuing to show
signs of recovery, while recovery in the office and retail sectors
will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating U.S. Conduit Transactions" published
in September 2000. 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. 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.
In addition, 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 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 39
compared to 46 at Moody's prior full review.
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 25, 2010. 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 6 months.
DEAL PERFORMANCE
As of the February 11, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 3% to $4.1
billion from $4.2 billion at securitization. The
Certificates are collateralized by 154 mortgage loans ranging in size
from less than 1% to 5.1% of the pool, with
the top ten loans representing 39% of the pool.
Forty-two loans, representing 15% 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. As
part of our ongoing monitoring of a transaction, Moody's reviews
the watchlist to assess which loans have material issues that could impact
performance.
Eight loans have been liquidated from the pool since securitization,
resulting in an aggregate $36.4 million loss (69%
loss severity on average). Currently twenty-three loans,
representing 11% of the pool, are in special servicing.
The largest specially serviced loan is the Ariel Preferred Retail Portfolio
Loan ($90.9 million -- 2.2%
of the pool), which is secured by a portfolio of six anchored retail
outlet centers located in suburban markets in California, Georgia,
Michigan, Minnesota, Montana and Nevada. The loan was
transferred to special servicing in June 2009 due to monetary default
and is currently in foreclosure. The servicer recognized a $36.2
million appraisal reduction for this loan in February 2011.
The remaining 22 specially serviced loans are secured by a mix of property
types. The master servicer has recognized an aggregate $206.4
million appraisal reduction for 20 of the specially serviced loans.
Moody's has estimated an aggregate $236.4 million loss (51%
expected loss on average) for 22 of the specially serviced loans.
Moody's has assumed a high default probability for 14 poorly performing
loans representing 7% of the pool and has estimated a $43.8
million loss (15% expected loss based on a 41% probability
default) from these troubled loans.
Based on the most recent remittance statement, Classes G through
S have experienced cumulative interest shortfalls totaling $23.9
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 entitlement reductions
(ASERs), loan modifications and extraordinary trust expenses.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 80% and 81% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 119% compared to 115% at last full review.
Moody's net cash flow reflects a weighted average haircut of 10%
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 DSCR are 1.30X and 0.93X, compared to
1.29X and 0.94X, respectively, at last full
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 15% of the pool
balance. The largest loan is One Beacon Street Loan ($210.0
million -- 5.1% of the pool), which is secured
by a premiere class A office building located in Boston, Massachusetts.
The total gross leasable area is 1 million square foot (SF) with the largest
tenants being Mass Housing Finance Agency (12% of the net rentable
area (NRA); lease expiration March 2015), JP Morgan Chase (9%
of the NRA; lease expiration December 2019) and Skadden, Arps,
Slate, Meagher & Flom LLP (6% of the NRA; lease
expiration March 2014). The property was 89% leased as of
September 2010 compared to 93% at last review. The property
was also encumbered by a $98 million mezzanine loan at securitization.
Moody's LTV and stressed DSCR are 77% and 1.23X, respectively,
compared to 81% and 1.17X at last full review.
The second largest loan is the 222 South Riverside Plaza Loan ($202.0
million -- 4.9% of the pool), which is secured
by two Class A office buildings with a combined total of 1.2 million
SF located in Chicago, Illinois. The largest tenants include
Fifth Third Bank (15% of the NRA; lease expiration December
2016), Deutsche Investment Management (10% of the NRA;
lease expiration December 2016) and Trading Technologies (10% of
the NRA; lease expiration January 2013). The property was
93% leased as of September 2010, the same as at last review..Moody's
LTV and stressed DSCR are 90% and 1.08X, respectively,
compared to 104% and 0.93X at last full review.
The third largest loan is the Arizona Grand Resort Loan, formerly
known as Pointe South Mountain Resort Loan, ($190.0
million -- 4.6% of the pool), which is secured
by a 640-unit full-service hotel located in Phoenix,
Arizona. The loan had previously been in special servicing but
was modified and subsequently returned to the master servicer.
. Under the loan modification agreement, the original loan
was split into an A Note ($100.0 million) and a B Note ($90.0
million), both of which remain included in the trust. The
A Note will remain interest only at 5.5% until March 2012
(at which point it will amortize on a 360 month schedule at a 6.68%
interest rate through maturity), while the B Note will bear no interest
and is payable in full at maturity. Due to the decline in the hotel
market in Phoenix, Arizona, Moody's has assumed a high default
probability on this loan.
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 purposes 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
Caroline Chan
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Keith Banhazl
Vice President - Senior Analyst
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 and Affirms 19 CMBS Classes of GSMC 2006-GG8
