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Rating Action:

Moody's Downgrades One and Affirms Seven CMBS Classes of LBUBS 2001-C2

Global Credit Research - 28 Jan 2013

Approximately $95.8 Million of Structured Securities Affected

New York, January 28, 2013 -- Moody's Investors Service (Moody's) affirmed the rating of seven classes and downgraded one class of LB-UBS, Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2001-C2 as follows:

Cl. X, Affirmed Caa3 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf)

Cl. D, Affirmed Aaa (sf); previously on Feb 2, 2012 Upgraded to Aaa (sf)

Cl. E, Affirmed A3 (sf); previously on Feb 24, 2011 Upgraded to A3 (sf)

Cl. F, Affirmed B1 (sf); previously on Feb 11, 2010 Downgraded to B1 (sf)

Cl. G, Affirmed B2 (sf); previously on Feb 2, 2012 Upgraded to B2 (sf)

Cl. H, Downgraded to Caa3 (sf); previously on Feb 2, 2012 Upgraded to Caa2 (sf)

Cl. J, Affirmed C (sf); previously on Feb 11, 2010 Downgraded to C (sf)

Cl. K, Affirmed C (sf); previously on Feb 11, 2010 Downgraded to C (sf)

RATINGS RATIONALE

The affirmation of the principal class is 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 class is sufficient to maintain its current rating. The rating of the IO Class, Class X is affirmed based on the ratings of its references classes.

The downgrade of one class is due to higher than expected realized and anticipated losses.

Moody's rating action reflects a base expected loss of 20.7% of the current balance compared to 12.9% at last review. Moody's provides a current list of base expected 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.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.

Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated.

The hotel sector is performing strongly with nine straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Recovery in the office sector continues at a measured pace with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by internet sales growth. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates.

Moody's central global macroeconomic scenario is for continued below-trend growth in US GDP over the near term, with consumer spending remaining soft in the US. Hurricane Sandy may skew near-term economic data but is unlikely to have any long-term macroeconomic effects. Primary downside risks include: a deeper than expected recession in the euro area accompanied by deeper credit contraction; the potential for a hard landing in major emerging markets, including China, India and Brazil; an oil supply shock; albeit abated in recent months; and given recent political gridlock, excessive fiscal tightening in the US in 2013 leading the US into recession. However, the Federal Reserve has shown signs of support for activity by continuing with quantitative easing.

The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000 and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. The Interest-Only Methodology was used for the rating of Class of X. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.62 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 credit assessment level, is incorporated for loans with similar credit assessments in the same transaction.

The conduit model includes an IO calculator, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee.

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 7 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 8.5 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 a review utilizing MOST® (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated February 2, 2012. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

DEAL PERFORMANCE

As of the January 17 2013 distribution date, the transaction's aggregate certificate balance has decreased by 93% to $95.8 million from $1.32 billion at securitization. The Certificates are collateralized by six mortgage loans ranging in size from less than 1% to 66% of the pool.

Two loans, representing 68% 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.

Twenty-two loans have been liquidated from the pool since securitization, resulting in an aggregate $55.7 million loss (36% loss severity on average). There are four loans, representing 27% of the pool, in special servicing. The largest specially serviced loan is the Shadowood Office Park Loan ($12.2 million -- 12.6% of the pool), which is secured by a 197,452 square foot (SF), three-building office complex located in Atlanta, Georgia. This loan was transferred to special servicing in February 2010 due to imminent monetary default and is now real estate owned (REO). The buildings are approximately 45% leased as of December 2012.

The second largest specially serviced loan is the Metroplex Tech Center I Loan ($9.1 million -- 9.5% of the pool), which is secured by a 106,000 SF office building located in Carrollton, Texas. The loan was transferred to special servicing in December 2009 due to technical default and is now REO.

The third largest specially serviced loan is Willow Ridge Loan ($5.2 million—5.4% of the pool). The loan is secured by a multifamily property located in Avondale estates, Georgia. The loan transferred to special servicing in November 2012 due to imminent maturity default. The loan matured in December 2012 and the borrower is pursuing a potential loan extension.

Moody's estimates an aggregate $18.8 million loss for all of the specially serviced loans (60% expected loss on average). The special servicer has recognized appraisal reductions totaling $9.7 million for two specially serviced loans.

Moody's was provided with full year 2010 and partial year 2011 operating results for 100% of the performing loans. Excluding specially serviced loans, Moody's weighted average LTV is 84% compared to 88% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 12% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.3%.

Excluding specially serviced loans, Moody's actual and stressed DSCRs are 1.10X and 1.20X, respectively, compared to 1.08X and 1.15X 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 largest performing loan is the NewPark Mall Loan ($63.4 million -- 67.8% of the pool), which is secured by the borrower's interest in a 1.2 million SF enclosed regional shopping mall located in Newark, California. The loan sponsor is Rouse Properties, Inc., a subsidiary of General Growth Properties (GGP). The loan had been in special servicing due to GGP's bankruptcy filing but was transferred back to the master servicer in the fall of 2010 after the maturity date was extended from June 2010 to August 2014 as part of the bankruptcy court's reorganization plan. Anchor tenants include Macy's, Sears and JC Penney. As of September 2012 in-line and total mall occupancy were 82% and 92%, respectively compared to 79% and 91% at last review. The loan is on the servicer's watchlist. Moody's LTV and stressed DSCR are 86% and 1.20X, respectively, compared to 85% and 1.18X at last review.

The second largest performing loan is the Woodbridge Commons Shopping Center Loan ($1.5 million -- 1.6% of the pool), which is secured by a 10,609 SF retail shopping center located in Elgin, Illinois. The loan returned from the special servicer in December 2011 after the maturity date was extended to March 2013. The loan is on the servicer's watchlist for upcoming maturity. Moody's LTV and stressed DSCR are 86% and 1.19X, respectively, compared to 96% and 1.07X at last review.

REGULATORY DISCLOSURES

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.

In conducting surveillance of this credit, Moody's considered performance data contained in servicer and remittance reports. Moody's obtains servicer reports on this transaction on a periodic basis, at least annually.

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.

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.

Lacey M Morgan
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

Michael Gerdes
MD - Structured Finance
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 and Affirms Seven CMBS Classes of LBUBS 2001-C2
No Related Data.
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