Approximately $792.6 Million of Structured Securities Affected
New York, August 26, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of six classes
and affirmed seven classes of Bear Stearns Commercial Mortgage Securities
Trust, Series 2002-Top6. Moody's rating action
is as follows:
US$647.947M Cl. A-2 Certificate, Affirmed
at Aaa (sf); previously on Mar 20, 2002 Definitive Rating Assigned
US$30.739M Cl. B Certificate, Affirmed at Aaa
(sf); previously on May 4, 2007 Upgraded to Aaa (sf)
US$30.739M Cl. C Certificate, Affirmed at Aa2
(sf); previously on Sep 25, 2008 Upgraded to Aa2 (sf)
US$12.575M Cl. D Certificate, Affirmed at A2
(sf); previously on May 4, 2007 Upgraded to A2 (sf)
US$25.15M Cl. E Certificate, Affirmed at Baa2
(sf); previously on Nov 28, 2005 Affirmed at Baa2 (sf)
US$9.78M Cl. F Certificate, Affirmed at Baa3
(sf); previously on Nov 28, 2005 Affirmed at Baa3 (sf)
US$12.575M Cl. G Certificate, Downgraded to
Ba2 (sf); previously on Nov 28, 2005 Affirmed at Ba1 (sf)
US$9.78M Cl. H Certificate, Downgraded to Ba3
(sf); previously on Nov 28, 2005 Affirmed at Ba2 (sf)
US$8.383M Cl. J Certificate, Downgraded to
B3 (sf); previously on Nov 28, 2005 Affirmed at Ba3 (sf)
US$5.588M Cl. K Certificate, Downgraded to
Caa3 (sf); previously on Nov 28, 2005 Affirmed at B1 (sf)
US$5.588M Cl. L Certificate, Downgraded to
C (sf); previously on Nov 28, 2005 Affirmed at B2 (sf)
US$2.794M Cl. M Certificate, Downgraded to
C (sf); previously on Nov 28, 2005 Affirmed at B3 (sf)
Cl. X-1 Certificate, Affirmed at Aaa (sf); previously
on Mar 20, 2002 Definitive Rating Assigned Aaa (sf)
The downgrades of Classes G through M are due to higher expected losses
for the pool resulting from realized and anticipated losses from specially
serviced and troubled loans and concerns about refinance risk in an adverse
environment. One hundred and fifteen loans, representing
73% of the pool, mature within the next 24 months.
The affirmations of Classes X-1 and A-2 through F are due
to key parameters, including Moody's loan to value (LTV) ratio,
Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl
(Herf) Index, remaining within acceptable ranges. Based on
our current base expected loss, the credit enhancement levels for
those classes affirmed are sufficient to maintain the existing rating.
Moody's rating action reflects a cumulative base expected loss of
1.7% of the current balance. At last review,
Moody's cumulative base expected loss was 0.8%.
Moody's stressed scenario loss is 5.0% of the current
balance. 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.
Depending on the future performance of the pool, 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 Bear Stearns Commercial Mortgage
Securities Trust, Series 2002-Top6 is "CMBS: Moody's
Approach to Rating Fusion Transactions" published on April 19,
2005". 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 (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
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 May 4, 2007. 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.
As of the August16, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 29% to $792.6
million from $1.11 billion at securitization. The
Certificates are collateralized by 124 mortgage loans ranging in size
from less than 1% to 8% of the pool, with the top
ten loans representing 44% of the pool. The pool includes
three loans with underlying ratings, representing 13% of
the pool. Twenty-one loans, representing 16%
of the pool, have defeased and are collateralized with U.S.
Government securities. Defeasance at last review represented 7%
of the pool. Two loans have been liquidated from the pool,
resulting in an aggregate realized loss of $13.1 million
(42% loss severity).
Sixteen loans, representing 7% 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) 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, representing 0.6% of the pool, are
currently in special servicing. The largest specially serviced
loan is the 560 W. Brown Road Loan ($3.1 million
-- 0.4% of the pool), which is secured by a 56,000
square foot medical office building in Maricopa, Arizona.
The loan was transferred to special servicing in May 2010 due payment
default. The loan is 90+ days delinquent and is currently
in the process of foreclosure. Per the special servicer,
the property is currently 33% leased compared to 72% in
The second largest specially serviced loan is the Polo Center Loan ($1.68
million -- 0.2% of the pool), which is secured
by a 39,000 square foot, mixed-use retail and office
property in Colorado Springs, Colorado. The property was
44% leased as of September 2009 compared to 72% in December
2008. The loan transferred into special servicing in March 2010
and is currently 90+ days delinquent. Moody's has estimated
an aggregate $2.4 million loss (51% expected loss
on average) for the specially serviced loans.
Moody's has assumed a high default probability for two poorly performing
loans representing 1% of the pool and has estimated an aggregate
$935,207 loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2008 and 2009 operating results
for 80% and 77%, respectively, of the pool.
Excluding defeased, specially serviced and troubled loans,
Moody's weighted average LTV is 69% compared to 73%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 13% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.9%.
Excluding defeased, specially serviced and troubled loans,
Moody's actual and stressed DSCRs are 1.64X and 1.75X,
respectively, compared to 1.70X and 1.59X 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 34 at Moody's prior review.
The largest loan with an underlying rating is the Regent Court Loan ($54
million -- 6.8% of the pool), which is secured
by a 567,000 square foot Class A office building located in Dearborn,
Michigan. The property is 100% leased to the Ford Motor
Company (Moody's senior unsecured rating B2, stable outlook) through
December 2016. The loan is co-terminus with the lease and
is fully amortizing. The loan has amortized by approximately 24%
since last review. Moody's current underlying rating and stressed
DSCR are Baa3 and 1.69X, respectively, compared to
Baa3 and 1.63X at last review.
The second largest shadow rated loan is the Best Buy Portfolio Loan ($24.2
million -- 3.1% of the pool), which is secured
by a portfolio of 12 retail properties totaling 481,000 square feet
and located in seven states. All of the properties are 100%
leased to Best Buy Co, Inc. (Moody's senior unsecured rating
Baa2, stable outlook) under a master lease through April 2018.
The loan has amortized by 8% since last review. Moody's
underlying rating and stressed DSCR are Baa1 and 1.67X, respectively,
compared to Baa1 and 1.61X at last review.
The third largest loan with an underlying rating is the Broadcom Corp.
Loan (2.6% of the pool), which is secured by a 200,000
square foot R&D building located in North San Jose, California.
The property is 100% leased to the Broadcom Corporation,
a designer of integrated chips for broadband communication. In
May 2010, Broadcom renewed its lease for an additional 10-year
term. The new net rent is approximately $18 per square foot
compared to $27 per square foot at securitization. The loan
is structured with a 25-year amortization schedule and has amortized
8% since last review. The loan matures in November 2011.
Moody's underlying rating and stressed DSCR are Baa3 and 1.60X,
respectively, compared to Baa2 and 1.70X.
The top three performing conduit loans represent 21% of the pool
balance. The largest conduit loan is the Coliseum Centre Loan ($64.5
million -- 8.1% of the pool), which is secured
by six Class A suburban office buildings totaling 974,000 square
feet. The buildings are situated in an office park located approximately
five miles from downtown Charlotte, North Carolina. The largest
tenants are CompUSA (20% of the net rentable area (NRA); lease
expires in 12/2013), Linsco Private Ledger (16% of the NRA;
lease expires in 10/2016) and Goodrich Corp. (12% of the
NRA; lease expires in 5/2018). As of December 2009,
the portfolio was 84% leased compared to 71% at last review.
Although financial performance has improved since last review, Moody's
analysis reflects a stressed cash flow due to concerns regarding significant
lease rollover exposure within the next 16 months. Moody's
LTV and stressed DSCR are 86% and 1.26X, respectively,
compared to 86% and 1.20X at last review.
The second largest conduit loan is the Bank One Center Loan ($58.4
million -- 7.4% of the pool), which is secured
by a 1.0 million square foot Class A office building located in
the New Orleans, Louisiana. The property is located in an
area of New Orleans that did not experience significant flooding during
Hurricane Katrina, but the property did sustain damage from high
winds and rain. All the repairs have been completed. The
largest tenants are Capital One Bank (Moody's senior unsecured rating
A2, on review for possible downgrade; 22% of the NRA;
lease expires in 12/2015), Jones Walker LLP (15% of the NRA;
lease expires in 12/2015) and JPMorgan Chase & Co. (Moody's
senior unsecured rating Aa3, negative outlook; 6% of
the NRA; lease expires in 1/2021). As of June 2010,
the property was 94% leased, essentially the same since last
review. Performance has improved due to higher base revenues and
amortization. The loan has amoritized by 5% since last review.
Moody's LTV and stressed DSCR are 88% and 1.35X, respectively,
compared to 100%, and 1.20X at last review.
The third largest conduit loan is the Capital City Mall Loan ($49.1
million -- 6.2% of the pool), which is secured
by the borrower's interest in a 608,000 square foot regional mall
located in suburban Harrisburg, Pennsylvania. The property
is anchored by JC Penney (21% of the NRA; lease expires in
11/2015), Sears (21% of the NRA; lease expires in 7/2014)
and Toys R' Us (10% of the NRA; lease expires in 1/2015).
As of June 2010, in-line shop occupancy was 92% compared
to 95% at last review. Total occupancy was 97%,
essentially the same since last review. Moody's LTV and stressed
DSCR are 66% and 1.46X, respectively, compared
to 71% and 1.37X 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
Service information; and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's Investors Service adopts all necessary measures so that the information
it uses in assigning a credit rating is of sufficient quality and from
reliable sources; however, Moody's Investors Service does not
and cannot in every instance independently verify, audit 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.
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 Six and Affirms Seven CMBS Classes of BSCMS 2002-Top6
250 Greenwich Street
New York, NY 10007