Approximately $3.3 Billion of Structured Securities Affected
New York, March 09, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of three classes
and affirmed the ratings of 21 classes of Credit Suisse Commercial Mortgage
Trust Commercial Mortgage Pass-Through Certificates, Series
2007-C1 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Apr 3, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Jun 23, 2010 Confirmed at Aaa (sf)
Cl. A-3, Affirmed at Aa3 (sf); previously on
Jun 23, 2010 Downgraded to Aa3 (sf)
Cl. A-1-A, Affirmed at Aa3 (sf); previously
on Jun 23, 2010 Downgraded to Aa3 (sf)
Cl. A-M, Downgraded to Ba1 (sf); previously on
Jun 23, 2010 Downgraded to Baa3 (sf)
Cl. A-MFL, Downgraded to Ba1 (sf); previously
on Jun 23, 2010 Downgraded to Baa3 (sf)
Cl. A-J, Downgraded to Caa1 (sf); previously
on Jun 23, 2010 Downgraded to B3 (sf)
Cl. B, Affirmed at Caa3 (sf); previously on Jun 23,
2010 Downgraded to Caa3 (sf)
Cl. C, Affirmed at Ca (sf); previously on Jun 23,
2010 Downgraded to Ca (sf)
Cl. D, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. E, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. F, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. G, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. H, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. J, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Jun 23,
2010 Downgraded to C (sf)
Cl. Q, Affirmed at C (sf); previously on Aug 6,
2009 Downgraded to C (sf)
Cl. A-X, Affirmed at Aaa (sf); previously on
Apr 3, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-SP, Affirmed at Aaa (sf); previously on
Apr 3, 2007 Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from anticipated losses from specially serviced and watchlisted loans,
realized losses and interest shortfalls hitting the A-J class.
The affirmations are due to key parameters, including Moody's
loan to value (LTV) ratio and stressed debt service coverage ratio (DSCR)
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. The significant decline
in loan diversity, as measured by the Herfindahl Index (Herf),
has been mitigated by increased subordination.
Moody's rating action reflects a cumulative base expected loss of
17.4% of the current balance. At last review,
Moody's cumulative base loss was 17.7%. Moody's
stressed scenario loss is 24.0% 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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011. The hotel and multifamily sectors are continuing
to show signs of recovery, while recovery in the office and retail
sectors will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating Conduit Transactions" published in September 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 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
credit estimates 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 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 35
compared to 53 at last review.
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 June 23, 2010. 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.
DEAL PERFORMANCE
As of the February 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 4% to $3.3
billion from $3.4 billion at securitization. The
Certificates are collateralized by 248 mortgage loans ranging in size
from less than 1% to 7% of the pool, with the top
ten loans representing 38% of the pool. No loans have defeased
and there are no loans in the pool with investment grade credit estimates.
Eighty-three loans, representing 30.2% of the
pool, including five of the top ten loans in 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.
Twenty-one loans have been liquidated from the pool since securitization,
resulting in a $49.2 million loss (19% average loss
severity). The pool had experienced an aggregate $14.5
million loss at last review. There are presently 42 loans,
representing 38% of the pool, in special servicing.
The largest specially serviced loan is the Savoy Park Loan ($210.0
million -- 6.5% of the pool), which is secured
by seven adjacent apartment buildings totaling 1,802 units located
in the Harlem neighborhood of New York City. The property is also
encumbered by a $157.5 million mezzanine loan. At
securitization, the borrower's plan was to increase property
value through a comprehensive renovation program and the deregulation
of rent-stabilized units. However, a slower than anticipated
conversion pace coupled with deteriorating market fundamentals have posed
challenges to the buyer's original investment strategy. As
of December 2009, 90% of the units were rent stabilized compared
to 91% at securitization. The interest reserve was replenished
since last review and now stands at $4.6 million.
This loan was transferred to special servicing July 2010 at the borrower's
request in pursuit of a loan modification and remains current.
The second largest loan in special servicing is the CVI Multifamily Apartment
Portfolio Loan ($178.8 million - 5.5%
of the pool), which is secured by 20 multi-family properties
totaling 2,990 units. The properties range from 12 to 434
units and are located in seven markets with the largest concentrations
in Austin, Texas and Sacramento, California. The loan
was transferred to special servicing April 2009 due to imminent default
and is currently 90+ days delinquent.
The third largest specially serviced loan is the Mansions Portfolio Loan
($156.0 million -- 4.8% of the pool),
which is secured by four multi-family properties totaling 1,417
units located in Austin and Round Rock, Texas. The loan was
transferred to special servicing in March 2009 for imminent default and
the borrower declared bankruptcy in April 2009. The original four
crossed loans were modified in July 2010 and now feature three separate
crossed secured and unsecured notes. All notes will remain interest
only with a lower initial interest rate in years one and two increasing
in year three for the balance of the secured notes. The unsecured
notes include an interest accrual feature. Property performance
has improved since the loan modification and the loans remain current.
The remaining 39 specially serviced loans are secured by a mix of property
types. The servicer has recognized an aggregate $254.9
million appraisal reduction on 36 of the specially serviced loans.
Moody's estimates an aggregate $443 million loss (overall
37% expected loss) for all specially serviced loans.
In addition to recognizing losses from specially serviced loans,
Moody's has assumed a high default probability for 47 poorly performing
loans representing 20% of the pool and has estimated a $54.9
million loss (9% expected loss based on a 25% probability
default) from these troubled loans.
As of the most recent remittance statement date, the transaction
has experienced unpaid accumulated interest shortfalls totaling $18.2
million affecting Classes A-J through T. Interest shortfalls
are caused by special servicing fees, appraisal reductions,
extraordinary trust expenses and interest payment reductions due to loan
modifications. Moody's expects interest shortfalls to increase
due to the pool's high exposure to specially serviced loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 96% and 83%, respectively, of the
pool's non-defeased loans. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 109%
compared to 121% at Moody's prior review. Moody's
net cash flow reflects a weighted average haircut of 11% to the
most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.51X and 1.02X, respectively,
compared to 1.27X and 0.89X 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 top three performing conduit loans represent 10% of the pool
balance. The largest loan is the Koger Center Loan ($115.5
million -- 3.6% of the pool), which is secured
by an 850,000 SF office building located in Tallahassee, Florida.
The largest tenant is the State of Florida which leases 69% of
the net rentable area (NRA) through October 2019. As of September
2010, the property was 92% leased versus 89% at last
review. The property's performance has remained stable since
last review yet Moody's stressed the cash flow to reflect the uncertainty
surrounding State of Florida budgetary issues. Moody's LTV
and stressed DSCR are 148% and 0.66X, respectively,
compared to 145% and 0.67X at last review.
The second largest conduit loan is the Trident Center Loan ($101.9
million -- 3.1% of the pool), which is secured
by a 366,123 SF office complex located in Los Angeles, California.
The largest tenants are two large law firms, Manatt, Phelps
and Phillips, which leases 57% of the NRA through April 2021
and Mitchell, Silberberg and Knupp, which leases 35%
of the NRA through April 2019. As of December 2010, the property
was 99% leased versus 100% at last review. Moody's
LTV and stressed DSCR are 119% and 0.82X, respectively,
compared to 125% and 0.78X at last review.
The third largest conduit loan is the HGA Portfolio Loan ($92.5
million -- 2.8% of the pool), which is secured
by a 1,538-unit multi-family portfolio with eleven
separate communities located in Maryland and Texas. The properties
were 89% occupied as of December 2010 versus 93% at last
review. Financial performance has improved since last review due
to fewer concessions despite occupancy declines. Moody's
LTV and stressed DSCR are 102% and 0.93X, respectively,
compared to 116% and 0.67X 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 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 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.
New York
Gregory Reed
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Keith Banhazl
Vice President - Senior Analyst
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 Three Classes and Affirms 21 CMBS Classes of CSCMT 2007-C1
