Approximately $506.5 Million of Structured Securities Affected
New York, September 16, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of seven classes
and affirmed nine classes of Banc of America Commercial Mortgage Inc.
Commercial Mortgage Pass-Through Certificates, Series 2001-1
Cl. A-2, Affirmed at Aaa (sf); previously on
Jun 28, 2001 Assigned Aaa (sf)
Cl. A-2F, Affirmed at Aaa (sf); previously on
Jul 28, 2001 Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Jun 28,
2001 Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Aug 2,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Oct 4,
2007 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Sep 25,
2008 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aa2 (sf); previously on Sep 25,
2008 Upgraded to Aa2 (sf)
Cl. F, Affirmed at A1 (sf); previously on Sep 25,
2008 Upgraded to A1 (sf)
Cl. G, Downgraded to Baa2 (sf); previously on Oct 4,
2007 Upgraded to Baa1 (sf)
Cl. H, Downgraded to B2 (sf); previously on Jun 28,
2001 Assigned Baa3 (sf)
Cl. J, Downgraded to Caa3 (sf); previously on Jun 28,
2001 Assigned Ba1 (sf)
Cl. K, Downgraded to Ca (sf); previously on Dec 14,
2004 Downgraded to B1 (sf)
Cl. L, Downgraded to C (sf); previously on Dec 14,
2004 Downgraded to B2 (sf)
Cl. M, Downgraded to C (sf); previously on Oct 4,
2007 Downgraded to Caa1 (sf)
Cl. N, Downgraded to C (sf); previously on Oct 13,
2006 Downgraded to Caa3 (sf)
Cl. O, Affirmed at C (sf); previously on Oct 13,
2006 Downgraded to C (sf)
The downgrades are due to realized and anticipated losses from specially
serviced and troubled loans and concerns about refinancing risk associated
with loans facing near-term maturity in an adverse market.
Sixty-four loans, representing 62% of the pool,
have matured or will mature within the next 12 months. Nine of
the loans, representing 13% of the pool, have a Moody's
stressed debt service coverage ratio (DSCR) less than 1.00X.
The affirmations are 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 classes are sufficient to maintain
the current ratings.
Moody's rating action reflects a cumulative base expected loss of
9.2% of the current balance. At last review,
Moody's cumulative base expected loss was 3.0%.
Moody's stressed scenario loss is 11.6% 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
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 2010
and 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 methodology used in rating Banc of America Commercial Mortgage
Inc. Commercial Mortgage Pass-Through Certificates,
Series 2001-C1 was "CMBS: Moody's Approach to Conduit Transactions"
rating methodology published in September 2000. Other methodologies
and factors that may have been considered in the process of rating this
issuer can also be found 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.
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 pay down 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
underlying ratings is melded with the conduit model credit enhancement
into an overall model result. Fusion loan credit enhancement is
based on the underlying rating 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 underlying rating level,
is incorporated for loans with similar underlying ratings in the same
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 September 25, 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 received and took into account one or
more third party due diligence reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had a neutral
impact on the ratings.
As of the August 16, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 47% to $506.5
million from $948.1 million at securitization. The
Certificates are collateralized by 79 mortgage loans ranging in size from
less than 1% to 5% of the pool, with the top ten loans
representing 28% of the pool. Seventeen loans, representing
38% of the pool, have defeased and are collateralized with
U.S. Government securities. Defeasance at last review
represented 35% of the pool.
Twenty-six loans, representing 27% 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
Thirty-two loans have been liquidated from the pool, resulting
in an aggregate realized loss of $31.9 million (23%
loss severity). Fourteen loans, representing 15% of
the pool, are currently in special servicing. The largest
specially serviced loan is the Historic Mission Inn Loan ($15.1million
-- 3% of the pool), which is secured by a luxury hotel
in Riverside, California. The loan was transferred to special
servicing in June 2010 due to the borrower's request for a discounted
pay off. The loan matures in January 2011. The loan is current.
The remaining 13 specially serviced loans are secured by a mix of property
types. Moody's has estimated an aggregate $20.0
million loss (36% expected loss on average) for the specially serviced
Moody's has assumed a high default probability for seventeen poorly
performing loans representing 18% of the pool and has estimated
a $21.9 million loss (18% expected loss based on
a 56% probability of default) from these troubled loans.
Moody's was provided with partial year 2009 operating results for
62% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 72% compared
to 88% at Moody's prior review. Moody's net
cash flow reflects a weighted average haircut of 10.9% to
the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.9%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.68X and 1.64X, respectively,
compared to 1.35X and 1.40X 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.
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 25
compared to 55 at Moody's prior review.
The top three performing conduit loans represent 10% of the pool
balance. The largest loan is the PCS Holdings Corp Loan ($20.6
million -- 4.1% of the pool), which is secured
by a 354,900 square foot office complex located in Scottsdale,
Arizona. The property is 100% triple net leased to PCS Health
Systems Inc through September 2021. The loan has amortized 5%
since last review. Moody's LTV and stressed DSCR are 54%
and 2.01X, respectively, compared to 70% and
1.50X at last review.
The second largest loan is the Talley Plaza Loan ($16.0
million -- 3.2% of the pool), which is secured
by a 223,400 square foot office building located in Phoenix,
Arizona. This loan is currently on the servicer's watchlist
due to occupancy concerns. The property was 79% leased as
of March 2010 compared to 76% at last review. The loan has
amortized 5% since last review and 11% since securitization.
Moody's LTV and stressed DSCR are 105% and 1.06X,
respectively, compared to 144% and 0.77X at last review.
The third largest loan is the Northwest-Hidden Valley Loan ($14.7
million -- 2.9% of the pool), which is secured
by a 119,000 square foot office property located in Bellevue,
Washington. The loan has amortized 5% since last review
and 11% since securitization. Moody's LTV and stressed
DSCR are 105% and 1.06X, respectively, compared
to 125% and 0.91X at last review.
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
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.
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Downgrades Seven and Affirms Nine CMBS Classes of BACM 2001-1
250 Greenwich Street
New York, NY 10007