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12 May 2010
Approximately $634.2 Million of Structured Securities Affected
New York, May 12, 2010 -- Moody's Investors Service ("Moody's") downgraded
seven classes of Morgan Stanley Mortgage Capital I Inc . Series
2007-XLF. This includes four pooled classes, and three
non-pooled, or rake, classes associated with the HRO
Hotel Portfolio Loan and the Starco Office Portfolio Loan. The
downgrades were due to the deterioration in the overall performance of
the assets in the trust, the significant concentration of loans
secured by riskier property types including hotels and undeveloped land,
and refinancing risk associated with loans approaching maturity in an
adverse environment. Approximately 78% of the loans by pooled
balance mature during calendar year 2011. Moody's also affirmed
one pooled class. Moody's placed seven classes on review
for possible downgrade on May 5, 2010. This action concludes
Moody's review. The rating action is a result of Moody's
on-going surveillance of commercial mortgage backed securities
As of the April 15, 2010 distribution date, the transaction's
certificate balance decreased by approximately 42% to $796
million from $1.4 billion at securitization due to the payoff
of five loans initially in the pool and partial loan pay downs associated
with five additional loans. The certificates are collateralized
by ten floating-rate loans ranging in size from 3% to 20%
of the pooled trust mortgage balance. The largest three loans account
for 50% of the pooled balance. The pool composition includes
office properties (47% of the pooled balance), hotel properties
(40%) and undeveloped land (13%).
There is currently one loan in special servicing (The New Boston Office
Portfolio Loan - 8.0% of the pooled balance).
It was transferred to special servicing on February 8, 2010 due
to the borrower's inability to post additional collateral of $3.5
million required to satisfy the debt service coverage ratio ("DSCR")
test necessary to qualify for the maturity extension to February 9,
2011. The loan was modified on April 9, 2010 and will be
transferred back to the master servicer once the three month rehabilitation
period is completed. Terms of the loan modification include an
extension of the loan maturity to February 9, 2011 with the option
to extend for an additional twelve months. The additional collateral
required to satisfy the DSCR test can be posted in installments through
January 9, 2011. Property release provisions were modified
to allow the release of an underperforming property in a manner that would
be accretive to the lender. Additionally, a letter of credit
in the amount of $9.2 million that was posted by the borrower
in July 2007 to meet the DSCR test after the release of one property can
now be drawn and applied to pay down the loan. The servicer expects
that this will occur on the May 2010 payment date.
Moody's weighted average pooled loan to value ("LTV")
ratio is 91%, compared to 83% at last review.
Moody's stressed debt service coverage ratio (DSCR) for pooled loans
is 0.85X, compared to 1.14X at last review.
Major remaining loans in the transaction include:
The Crowne Plaza Times Square Loan ($151.8 million --
20%) is secured by leasehold interests in a 770-key,
full service hotel located at 49th Street and Broadway in the Times Square
area of New York, NY. The hotel underwent an $85 million
renovation that was completed in late 2008. In addition to the
hotel rooms, loan collateral includes approximately 180,328
square feet of office space, 42,121 square feet of retail
space and a 159-car parking garage. The commercial component
was 98% leased as of December 2009. Two tenants, American
Management Associates (155,506 square feet) and TSI Broadway (46,820
square feet), lease approximately 91% of the commercial space
with lease expirations in 2016 and 2019, respectively. The
commercial component contributes approximately 13% of total gross
Revenue per available room ("RevPAR"), calculated by
multiplying the average daily rate by the occupancy rate, for calendar
year 2009 decreased approximately 19% to $208 from $258
at securitization. Moody's has a stable outlook for the US
lodging industry and although we expect positive US RevPAR growth in 2010,
we think that it will take some time for the increase in RevPAR to translate
to growing bottom lines. The loan is interest-only for the
full term with extension options through December 2011. Moody's
LTV for the trust debt is 93% and Moody's stressed debt service
coverage is 0.91X. Moody's current underlying rating
for the pooled debt is B3.
The HRO Portfolio Loan ($133.3 million -- 17%)
is secured by six full-service hotels totaling 2,179 keys.
The loan has paid down approximately 12% since securitization due
to the release of the 205-key Sheraton College Park hotel.
The six remaining hotels are branded as Westin, Sheraton,
Hilton and Marriott. One of the Sheraton hotels, the Sheraton
Danbury with 242 keys, is now without a flag and is currently known
as the Danbury Plaza Hotel and Conference Center. At securitization
the objective for the portfolio was to improve performance through renovations
and aggressive management. These assets have not met expectations.
RevPAR for the portfolio was $48 in calendar year 2009 compared
to $72 in 2007. The last hotel to be renovated was the 349-key
Sheraton Buckhead (Atlanta, Georgia) that re-opened in November
2009 after a $59 million ($169,000/key) renovation
and was re-flagged as a Marriott.
The loan is interest only for the full term with extension options through
October 2011. Moody's LTV for the trust debt is 103%
and Moody's stressed DSCR is 0.44X. Moody's
current underlying rating for the pooled debt is Caa1. Additionally,
there are junior trust loans secured by the portfolio that are the rake
classes M-HRO and N-HRO that have been downgraded to Caa2
from B1 and Caa3 from B2, respectively.
Babcock Ranch Loan ($100 million -- 13%) is secured
by a 17,890-acre parcel of vacant land located in Charlotte
County and Lee County, Florida, approximately 15-miles
northeast of downtown Fort Meyers. The collateral is part of the
larger Babcock Ranch that totals 91,361 acres, with the remaining
acres having been sold to the State of Florida for preservation.
The loan sponsor, Kitson & Partners and MSREF V Domestic Funding,
L.P., intends to develop the property into a planned
community containing at least 17,870 residential units and 6 million
square feet of commercial space with electricity provided by a to-be-constructed
solar energy facility. The mortgage loan was made in order to provide
the borrower with financing during the period necessary for it to obtain
the approvals needed for development.
Values for undeveloped land in south Florida have fallen significantly
over the past two years as home prices have fallen and the inventory of
unsold homes has risen. The Cape Coral-Fort Meyers metro
area reportedly has the third highest metro residential foreclosure rate
in the nation with one in every 35 housing units receiving a foreclosure
filing (2.82%) despite a decrease in the rate of foreclosures
from 2009 to 1st Quarter 2010.
The loan is interest-only for the full term with extension options
through August 2011. Moody's LTV for the trust debt is 93%,
compared to 62% at Moody's last review. Moody's
current underlying rating for the pooled debt is Caa1.
The Starco Portfolio Loan ($76.2 million -- 10%)
is secured by eight Class A and Class B office properties containing 786,133
square feet. Seven of the properties are located in northern Virginia
and one is located in Columbia, Maryland. Four of the properties
are located in the Route 28 Corridor South submarket that had a 22%
vacancy rate as of 1st Quarter 2010. As of February 2010,
the portfolio was 89% leased with individual property occupancies
ranging from 74% to 100%. The loan is interest-only
for the full term with extension options through December 2011.
Moody's LTV for the trust debt is 102% and Moody's
stressed DSCR is 0.87X. Moody's current underlying
rating for the pooled debt is B3.
Moody's rating action is as follows:
-Class A-1, $280,606,489,
affirmed at Aaa; previously on February 23, 2007 assigned Aaa
-Class A-2, $229,729,000,
downgraded to Aa3 from Aaa; previously on February 23, 2007
-Class B, $41,211,000, downgraded
to A2 from Aa2; previously on March 3, 2009 downgraded to Aa2
-Class C, $41,211,000, downgraded
to Baa1 from A1; previously on March 3, 2009 downgraded to
A1 from Aa1
-Class D, $25,190,000, downgraded
to Baa3 from A3; previously on March 3, 2009 downgraded to
A3 from Aa2
-Class M-HRO, $5,261,723,
downgraded to Caa2 from B1; previously on March 3, 2009 downgraded
to B1 from Baa2
-Class N-HRO, $8,111,822,
downgraded to Caa3 from B2; previously on March 3, 2009 downgraded
to B2 from Baa3
-Class M-STR, $2,886,176,
downgraded to Caa1 from Ba3; previously on March 3, 2009 downgraded
to Ba3 from Baa3
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 review is summarized
in a Press Release dated March 3, 2009. The previous review
was part of Moody's first quarter 2009 ratings sweep and incorporated
assumptions for capitalization rates and stressed cash flows that were
outlined in "Rating Methodology Update: US CMBS Conduit and Fusion
Review Prompted by Declining Property Values and Rising Delinquencies"
dated February 5, 2009.
The principal methodology used in rating and monitoring this transaction
was Moody's "CMBS: Moody's Approach to Rating Large Loan/Single
Borrower Transactions", published on July 7, 2000 and available
on www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this transaction
can also be found in the Rating Methodologies sub-directory on
Moody's website. 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
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Moody's Downgrades Seven Classes of Morgan Stanley Capital I Inc. 2007-XLF
Andrea M. Daniels
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
No Related Data.
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