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Rating Action:

Moody's Downgrades One and Affirms Four Classes of CTL BSCMS 1999-CLF1

Global Credit Research - 17 Mar 2011

Approximately $193.2 Million of Structured Securities Affected

New York, March 17, 2011 -- Moody's Investors Service (Moody's) downgraded the rating of one class and affirmed four classes of Bear Stearns Commercial Mortgage Securities Inc., Corporate Lease-Backed Certificates, Series 1999-CLF1 as follows:

Cl. X, Affirmed at Aaa (sf); previously on Jan 25, 2001 Confirmed at Aaa (sf)

Cl. A-3, Affirmed at Aaa (sf); previously on Jan 31, 2008 Confirmed at Aaa (sf)

Cl. A-4, Affirmed at Aaa (sf); previously on Jan 31, 2008 Confirmed at Aaa (sf)

Cl. B, Affirmed at Aa3 (sf); previously on Dec 23, 2003 Downgraded to Aa3 (sf)

Cl. C, Downgraded to Baa2 (sf); previously on Apr 7, 2008 Confirmed at A3 (sf)

RATINGS RATIONALE

The downgrades are due to higher expected losses for the pool resulting from actual and anticipated losses from specially serviced loans and a decline in deal's weighted average rating factor (WARF). This transaction 100% consists of loans secured by credit tenant leases (CTLs). The affirmations are due an increase in deal subordination due to amortization and paydowns. The (sf) indicator is being added to the ratings of this transaction pursuant to Moody's practice of differentiating ratings assigned to structured finance obligations.

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 Credit Tenant Lease (CTL) Backed Transactions" published in October 2, 1998.

For deals that include a pool of credit tenant loans, Moody's currently uses a Gaussian copula model, incorporated in its public CDO rating model CDOROMv2.8 to generate a portfolio loss distribution to assess the ratings. Under Moody's CTL approach, the rating of a transaction's certificates is primarily based on the senior unsecured debt rating (or the corporate family rating) of the tenant, usually an investment grade rated company, leasing the real estate collateral supporting the bonds. This tenant's credit rating is the key factor in determining the probability of default on the underlying lease. The lease generally is "bondable", which means it is an absolute net lease, yielding fixed rent paid to the trust through a lock-box, sufficient under all circumstances to pay in full all interest and principal of the loan. The leased property should be owned by a bankruptcy-remote, special purpose borrower, which grants a first lien mortgage and assignment of rents to the securitization trust. The dark value of the collateral, which assumes the property is vacant or "dark", is then examined to determine a recovery rate upon a loan's default. Moody's also considers the overall structure and legal integrity of the transaction.

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 prior full review is summarized in a press release dated April 7, 2008. 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 February 22, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 42% to $221.1 million from $383.4 million at securitization. The Certificates are collateralized by 143 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 45% of the pool. The entirety of the pool is backed by CTL loans. Three loans representing 2% of the pool have defeased and are collateralized with U.S. Government securities.

Six loans, representing 8% 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.

Two loans have been liquidated from the pool since securitization, resulting in an aggregate $3.7 million loss (72% loss severity on average). Six loans, representing 3% of the pool, are currently in special servicing. Two of the specially serviced loans are backed by former Circuit City CTLs ($4.7 million -- 2.1% of the pool). Both loans were transferred to special servicing due to the bankruptcy of Circuit City. The other specially serviced loans are backed by the United States Postal Service and are in special servicing due to a borrower payment default. The tenant is current in its lease obligations and the special servicer has instituted a cash control system to directly obtain those payments from the tenant. The master servicer has recognized an aggregate $4.0 million appraisal reduction for two of the specially serviced loans. Moody's has estimated an aggregate $4.4 million loss for the specially serviced loans (74% expected loss on average).

Based on the most recent remittance statement, Classes E and F have experienced cumulative interest shortfalls totaling $314,000. Moody's anticipates that the pool will continue to experience interest shortfalls because of the exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions (ASERs), extraordinary trust expenses and non-advancing by the master servicer based on a determination of non-recoverability.

The largest exposures are Rite Aid ($31.5 million -- 14% of the pool; senior unsecured rating: Caa3 -- stable outlook), Koninklijke Ahold, N.V. ($30.6 million -- 14% of the pool; senior unsecured rating: Baa3 -- stable outlook) and United State Postal Service ($23.8 million -- 11% of the pool). Approximately 78% of the credits in the pool have a Moody's public rating. We have completed updated credit estimates for the non-Moody's rated reference obligations. The bottom-dollar WARF is a measure of the default probability within the pool. Moody's modeled a bottom-dollar WARF of 1,779 compared to 1,143 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
Seth Anspach
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 One and Affirms Four Classes of CTL BSCMS 1999-CLF1
No Related Data.
© 2018 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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