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Rating Action:

Moody's Downgrades One Interest-Only Class of DLJCM 1998-CF1

18 Dec 2014

Approximately $14.9 Million of Notional Structured Securities Affected

New York, December 18, 2014 -- Moody's Investors Service (Moody's) has downgraded the rating of one class in DLJ Commercial Mortgage Corp., Commercial Mortgage Pass-Through Certificates, Series 1998-CF1 as follows:

Cl. S, Downgraded to Caa2 (sf); previously on Jan 24, 2014 Affirmed Caa1 (sf)

RATINGS RATIONALE

The rating on the IO Class (Class S) was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes.

Moody's rating action reflects a base expected loss of 1.9% of the current balance compared to 5.6% at Moody's prior review. Moody's base expected loss plus realized losses is now 1.7% of the original pooled balance compared to 1.9% at the prior review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The rating of an IO class is based on the credit performance of its referenced classes. An IO class may be upgraded based on a lower weighted average rating factor or WARF due to an overall improvement in the credit quality of its reference classes. An IO class may be downgraded based on a higher WARF due to a decline in the credit quality of its reference classes, paydowns of higher quality reference classes or non-payment of interest. Classes that have paid off through loan paydowns or amortization are not included in the WARF calculation. Classes that have experienced losses are grossed up for losses and included in the WARF calculation, even if Moody's has withdrawn the rating.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in this rating were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in December 2014, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model v3.0, which it uses for both conduit and fusion transactions. Credit enhancement levels for conduit loans are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Moody's fuses the conduit results with the results of its analysis of investment grade structured credit assessed loans and any conduit loan that represents 10% or greater of the current pool balance.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 5, the same as at Moody's last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v8.7 and then reconciles and weights the results from the conduit and large loan 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. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

DEAL PERFORMANCE

As of the December 15, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 98% to $14.9 million from $838.8 million at securitization. The Certificates are collateralized by nine mortgage loans ranging in size from 3% to 24% of the pool. Two loans, representing 23% of the pool, have defeased and are secured by US Government securities.

One loan, representing 3% of the pool, is 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.

Eleven loans have been liquidated from the pool, resulting in an aggregate realized loss of $13.6 million (23% loss severity on average). Currently, there are no loans are in special servicing.

Moody's received full year 2013 operating results for 86% of the pool and full or partial year 2014 operating results for 43% of the pool. Moody's weighted average conduit LTV is 79% compared to 88% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 11% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.6%.

Moody's actual and stressed conduit DSCRs are 1.06X and 1.87X, respectively, compared to 1.02X and 1.49X at the 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 56% of the pool balance. The largest loan is the Randall's Store Loan ($3.6 million -- 24% of the pool), which is secured by a 59,000 square-foot Randall's grocery store in Sugar Land, Texas, 24 miles south of Houston. The property is fully leased to Randall's through November 2022, which extends five years beyond the loan maturity date in December 2017. Moody's LTV and stressed DSCR are 84% and 1.42X, respectively, compared to 86% and 1.39X at the last review.

The second largest loan is the Walgreens -- Seattle Loan ($2.4 million -- 16% of the pool), which is secured by a Walgreens located 11 miles southeast of Seattle's Central Business District. The property is fully leased to Walgreens through October 2056, but the tenant has an option to terminate the lease in October 2016, one year before the loan matures. Moody's performed a lit-dark analysis on this loan to account for the risk of the tenant vacating the space. Moody's LTV and stressed DSCR are 91% and 1.31X, respectively.

The third largest loan is the Walgreens -- Gresham Loan ($2.4 million -- 16% of the pool), which is secured by a Walgreens in Gresham, Oregon, approximately 17 miles east of Portland, Oregon. The property is fully leased to Walgreens through July 2056. Moody's LTV and stressed DSCR are 91% and 1.31X, respectively.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Stephanie Sun
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Keith Banhazl
Senior Vice President
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Downgrades One Interest-Only Class of DLJCM 1998-CF1
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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