Approximately $264.2 Million of Structured Securities Affected
New York, February 24, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of seven classes,
confirmed one class and affirmed six classes of ROCK 2001-C1,
Series 2001-C1 Commercial Mortgage Pass-Through Certificates
as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
May 30, 2001 Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
May 30, 2001 Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on May 26,
2005 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Dec 8,
2006 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Feb 8,
2007 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Jul 24,
2008 Upgraded to Aaa (sf)
Cl. F, Confirmed at Aaa (sf); previously on Dec 10,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to Baa2 (sf); previously on Dec 10,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Ba2 (sf); previously on Dec 10,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to Caa1 (sf); previously on Dec 10,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to Caa2 (sf); previously on Dec 10,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to Caa3 (sf); previously on Dec 10,
2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Dec 10,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. N, Downgraded to C (sf); previously on Dec 10,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
RATINGS RATIONALE
The downgrades are due to interest shortfalls (as of February 2011,
interest shortfalls reached class H which is was rated A3) and higher
expected losses resulting from anticipated losses from troubled loans
and higher credit quality dispersion.
The confirmation and affirmations are due to key parameters, including
Moody's 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
12.2% of the current balance. At last review,
Moody's cumulative base expected loss was 1.9%.
Moody's stressed scenario loss is 13.8% 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 stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2011;
we expect overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal deficits
and persistent unemployment levels.
The principal methodologies used in this rating were: "CMBS:
Moody's Approach to Rating Fusion Transactions" published April 19,
2005 and "CMBS: Moody's Approach to Rating Large Loan/Single
Borrower Transactions" published in July 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 credit estimate 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 estimate level, is incorporated
for loans with similar credit estimates in the same transaction.
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 7 compared
to 26 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 8.0 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 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 July 24, 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 10, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 71% to $264.2
million from $908.2 million at securitization. The
Certificates are collateralized by 37 mortgage loans ranging in size from
less than 1% to 34% of the pool, with the top ten
loans representing 73% of the pool. The pool includes one
loan with an investment-grade credit estimate, representing
34% of the pool.
Thirteen loans, representing 53% 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.
Three loans have been liquidated from the pool, resulting in a realized
loss of $3.8 million (21% loss severity).
Eleven loans, representing 33% of the pool, are in
special servicing (six loans transferred in January 2011). The
largest specially serviced loan is the IDT Building (3) Loan ($25.2
million -- representing 9.5% of the pool), which
is secured by a 444,000 square foot (SF) Class B office building
located in downtown Newark, New Jersey. The building originally
served as headquarters for IDT Corp, a provider of wholesale and
telecommunications, but the company vacated in February 2009.
The borrower has been actively marketing the space but has been unable
to secure a long term lease. The loan transferred to special servicing
on January 27, 2011 due to borrower not remitting to the trust funds
received from an insurance policy for water damage at the property.
The borrower has not yet repaired the damage. The loan is current.
The borrower has identified a tenant who is anticipated to lease a majority
of the property. Moody's is not currently recognizing a loss but
has incorporated a loss factor in our analysis.
The second largest specially serviced loan is the Lexmark Distribution
Center Loan ($13.9 million -- representing 5.3%
of the pool), which is secured by a 750,000 SF build to suit
industrial distribution center located in Seymour, Indiana.
The property was originally 100% leased to Lexmark International.
Lexmark choose not to renew its lease at lease maturity in June 2010 and
the property is currently vacant. The special servicer filed a
foreclosure complaint and motion for receiver and the foreclosure was
set for January 21, 2011.
The remaining nine specially serviced loans are secured by a mix of property
types. Moody's has estimated an aggregate $25.1 million
loss (54% expected loss on average) for all of the specially serviced
loans.
Moody's has assumed a high default probability for one poorly performing
loan representing 1% of the pool and has estimated an aggregate
$426,000 loss (20% expected loss based on a 50%
probability default) from this troubled loan.
Moody's was provided with full year 2009 operating results for 79%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 91% compared to 85%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 10.3% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.8%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.21X and 1.31X, respectively,
compared to 1.25X and 1.35X 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 loan with an investment grade credit estimate is the RREEF
Portfolio Loan ($91.0 million -- 34.4%),
which is secured by nine properties totaling 3.7 million square
feet. The properties include industrial (5), retail (2),
multifamily (1) and office (1) and are located in six states. The
portfolio was 100% leased as of December 2009, compared to
91% at the prior review. The loan is interest only for the
full term. Moody's current underlying rating and stressed DSCR
are Aaa and 3.02X, respectively, the same as at last
review.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the 500 South Front Street Loan ($17.2
million -- 6.5% of the pool), which is secured
by a 150,000 SF Class A office building located in Columbus,
Ohio. The loan originally matured in October 2010 but was subsequently
extended through April 2011 with three additional extension options.
The property was 69% leased as of June 2010 compared to 98%
at the prior review. Moody's LTV and stressed DSCR are 112%
and 0.94X, respectively, compared to 83% and
1.27X at last review.
The second largest loan is the Dakota Bank Building Phase I & II Loan
($7.1 million -- 2.7% of the pool),
which is secured by 120,000 SF office building located in Fargo,
North Dakota. The property was 98% leased through October
2010 compared to 100% at the prior review. A majority of
the space is leased to U.S. Bank and Merrill Lynch.
Performance has significantly improved since last review. Moody's
LTV and stressed DSCR are 59% and 1.91X, respectively,
compared to 72% and 1.57X at last review.
The third largest loan is the Canyon Creek Apartments ($6.5
million -- 2.5% of the pool), which is secured
by 242 unit apartment complex located in Tucson, Arizona.
The property was 96% leased as of December 2009 compared to 93%
at the last review. Moody's LTV and stressed DSCR are 76%
and 1.36X, respectively, compared to 73% and
1.41X 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
Amit Rustgi
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 Seven, Confirms One and Affirms Six CMBS Classes of ROCK 2001-C1
