Approximately $1.17 Billion of Structured Securities Affected
New York, November 03, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of six classes
and affirmed seven classes of Commercial Mortgage Asset Trust ,
Commercial Mortgage Pass-Through Certificates, Series 1999-C1
Cl. A-3, Affirmed at Aaa (sf); previously on
Mar 25, 1999 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Mar 25, 1999 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Mar 25,
1999 Definitive Rating Assigned Aaa (sf
Cl. B, Affirmed at Aaa (sf); previously on Jul 8,
2004 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Jul 20,
2006 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, Downgraded to Baa2 (sf); previously on Aug 9,
2007 Upgraded to Baa1 (sf)
Cl. G, Downgraded to B3 (sf); previously on Mar 25,
1999 Definitive Rating Assigned Ba2 (sf)
Cl. H, Downgraded to Caa3 (sf); previously on Mar 25,
1999 Definitive Rating Assigned Ba3 (sf)
Cl. J, Downgraded to C (sf); previously on May 7,
2009 Downgraded to Caa2 (sf)
Cl. K, Downgraded to C (sf); previously on May 7,
2009 Downgraded to Ca (sf)
Cl. L, Downgraded to C (sf); previously on Jul 20,
2006 Downgraded to Ca (sf)
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans and concerns about loans approaching maturity in an adverse environment.
Forty-four loans, representing 52% of the pool,
mature within the next 36 months. Nine of these loans, representing
27% of the pool, have a Moody's stressed debt service
coverage ratio (DSCR) less than 1.0X.
The affirmations are due to key parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed 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
9.1% of the current balance. At last review,
Moody's cumulative base expected loss was 6.6%.
Moody's stressed scenario loss is 12.2% 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 methodologies used in these ratings were: "CMBS:
Moody's Approach to Rating Fusion Transactions" published in April 2005
and "CMBS: Moody's Approach to Rating Credit Tenant Lease (CTL)
Backed Transactions" published in October 1998.
In addition to methodologies and research available on moodys.com,
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 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.
For deals that include a pool of credit tenant loans, Moody's
currently uses a Gaussian copula model, incorporated in its public
CDO rating model CDOROMv2.6 to generate a portfolio loss distribution
to assess the ratings. Under Moody's CTL approach,
the rating of a transaction's certificates is primarily based on
the senior unsecured debt rating (or the corporate family rating) of the
tenant, usually an investment grade rated company, leasing
the real estate collateral supporting the bonds. This tenant's
credit rating is the key factor in determining the probability of default
on the underlying lease. The lease generally is "bondable",
which means it is an absolute net lease, yielding fixed rent paid
to the trust through a lock-box, sufficient under all circumstances
to pay in full all interest and principal of the loan. The leased
property should be owned by a bankruptcy-remote, special
purpose borrower, which grants a first lien mortgage and assignment
of rents to the securitization trust. The dark value of the collateral,
which assumes the property is vacant or "dark", is then
examined to determine a recovery rate upon a loan's default.
Moody's also considers the overall structure and legal integrity
of the transaction.
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 7, 2009. 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
As of the October 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 50% to $1.17
billion from $2.37 billion at securitization. The
Certificates are collateralized by 139 mortgage loans ranging in size
from less than 1% to 10% of the pool, with the top
ten non-defeased loans representing 41% of the pool.
Forty-one loans, representing 25% of the pool,
have defeased and are collateralized with U.S. Government
securities. The pool contains 10 loans, representing 6%
of the pool, that are credit tenant lease (CTL) loans.
Thirty-six loans, representing 22% 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
Twenty-two loans have been liquidated from the pool, resulting
in an aggregate realized loss of $48.7 million (34%
loss severity overall). Four loans, representing 18%
of the pool, are currently in special servicing. The master
servicer has recognized an aggregate $5.2 million appraisal
reduction for two of the specially serviced loans.
The largest specially serviced loan is The Source Loan ($124.0
million -- 10.6%), which is secured by a 521,500
square foot mall located in Westbury, New York. The center
is shadow anchored by a Fortunoff Backyard store. Two of the larger
tenants in the mall were Circuit City and Steve & Barry's, both
of which declared bankruptcy and vacated the mall several years ago.
The loan was transferred to special servicing in January 2009 due to tenant
issues as well as pending maturity. The loan matured on March 11,
2009 and was unable to refinance. The loan sponsor is Simon Property
Group. The loan is 90+ days delinquent. The servicer
is discussing a loan extension but is also considering enforcement actions.
The second largest loan in special servicing is the Springfield Mall Loan
($78.7 million - 6.7%), which
represents a 50% pari passu interest in a $157.4
million loan. The loan is secured by the borrower's interest in
a 1.4 million square foot regional mall located in Springfield
(Fairfax County), Virginia. The property is anchored by J.C.
Penney, Macy's and Target. The loan sponsor is Vornado Realty
who purchased the property in 2005 and originally planned a major redevelopment
and expansion of the property. The loan is in the process of foreclosure.
The remaining two specially serviced loans, representing 0.5%
of the pool, are real estate owned (REO). Moody's is estimating
an aggregate $74.6 million loss from the specially serviced
Moody's has assumed a high default probability for four poorly performing
loans representing 6% of the pool and has estimated a $15.1
million loss (20% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 89% and 54% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 67% compared to 82% 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
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.60X and 1.90X, respectively,
compared to 1.39X and 1.60X 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 21
compared to 29 at Moody's prior review.
The top three performing conduit loans represent 10% of the pool
balance. The largest loan is the Laurel Mall Loan ($46.4
million -- 4.0%), which is secured by the borrower's
interest in a 505,000 square foot regional mall located in Livonia,
Michigan. The mall is anchored by Von Maur and Parisian and is
99% leased, essentially the same as last review. The
loan sponsor is CBL & Associates Properties, Inc. Performance
has been stable. Moody's LTV and stressed DSCR are 68%
and 1.54X, respectively, compared to 70% and
1.51X at last review.
The second largest loan is the Baldwin Complex Loan ($42.3
million - 3.6%), which is secured by two office
buildings located in Cincinnati, Ohio. The two buildings
total 455,000 square feet. The property is only 50%
leased compared to 58% at last review. The loan is current
but on the servicer watchlist due to low occupancy and DSCR. Moody's
considers this loan to be a high default risk and has identified it as
a troubled loan. Moody's LTV and stressed DSCR are 163%
and 0.73X, respectively, compared to 188% and
0.63X at last review.
The third largest loan is the Best of the West Shopping Center Loan ($35.1
million - 3.0%), which is secured by a 475,000
square feet retail property located in Las Vegas, Nevada.
The property is 89% leased, the same as last review.
Performance has been stable. Moody's LTV and stressed DSCR
are 64% and 1.59X, respectively, compared to
65% and 1.58X at last review.
The CTL component includes ten loans secured by properties leased under
bondable leases. The largest CTL exposures are Accor SA ($35.9
million -- 3.1%;) and R.R. Donnelley
& Sons Co. ($18.2 million -- 1.5%;
Moody's senior unsecured rating Baa3 - stable outlook).
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 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.
Asst Vice President - 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 Six and Affirms Seven CMBS Classes of CMAT 1999-C1
250 Greenwich Street
New York, NY 10007