Approximately $242.3 Million of Structured Securities Affected
New York, September 16, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of three classes,
upgraded two classes, confirmed one class and affirmed six classes
of Salomon Brothers Commercial Mortgage Trust 2000-C3, Commercial
Mortgage Pass-Through Certificates, Series 2000-C3
Cl. A-2, Affirmed at Aaa (sf); previously on
Dec 19, 2000 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Dec 19,
2000 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Oct 13,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Jul 9,
2007 Upgraded to Aaa (sf)
Cl. D, Upgraded to Aaa (sf); previously on Jul 9,
2007 Upgraded to Aa1 (sf)
Cl. E, Upgraded to Aa1 (sf); previously on Jul 9,
2007 Upgraded to Aa3 (sf)
Cl. F, Confirmed at A3 (sf); previously on Aug 12,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to Ba1 (sf); previously on Aug 12,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to C (sf); previously on Aug 12,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to C (sf); previously on Aug 12,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. L, Affirmed at C (sf); previously on Aug 12,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Aug 12,
2010 Downgraded to C (sf)
The downgrades are due to higher expected losses from the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans and concerns about refinance risk associated with loans facing near-term
maturity in an adverse environment. Thirty-three loans,
representing 55% of the pool, have either matured or are
scheduled to mature within the next six months. Eleven of these
loans, representing 23% of the pool have a Moody's stressed
debt service coverage (DSCR) less than 1.00X.
The upgrades are due to the increased credit support due to loan payoffs
and principal amortization. The deal has amortized by approximately
60% since Moody's prior review in July 2009.
The confirmation and affirmations are due to key rating 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 the current
Moody's placed four classes of this transaction on review for possible
downgrade on August 12, 2010. This action concludes the review.
Moody's rating action reflects a cumulative base expected loss of 12.9%
of the current balance. At last review, Moody's cumulative
base expected loss was 4.5%. Moody's stressed scenario
loss is 15.8% 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. In addition,
further downgrades may be warranted if interest shortfalls increase above
their current levels.
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
The principal methodologies used in rating Salomon Brothers Commercial
Mortgage Trust 2000-C3, Commercial Mortgage Pass-Through
Certificates, Series 2000-C3 was "CMBS: Moody's Approach
to Rating U.S. Conduit Transactions" published in September
2000 and "Moody's Approach to Rating Large Loan/Single Borrower Transactions"
published in July 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 (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
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 19, 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 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 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 71% to $269.70
million from $914.66 million at securitization. The
Certificates are collateralized by 54 mortgage loans ranging in size from
less than 1% to 8% of the pool, with the top ten loans
representing 42% of the pool. Nine loans, representing
37% of the pool, have defeased and are collateralized with
U.S. Government securities. Defeasance at last review
represented 47% of the pool.
Nineteen loans, representing 25% 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.
Twenty-two loans have been liquidated from the pool, resulting
in an aggregate realized loss of $23.3 million (20%
loss severity on average). Fourteen loans, representing 29%
of the pool, are currently in special servicing. The largest
specially serviced loan is the Jorie Plaza Loan ($20.7 million
-- 7.8% of the pool), which is secured
by two office buildings located in Oak Brook, Illinois. The
loan was transferred to special servicing in September 2008 due to imminent
default and is currently real estate owned (REO). The second largest
specially serviced loan is the Westland Meadows Loan ($20.3
million -- 7.6% of the pool), which is secured
by a manufactured housing property located in Westland, Michigan.
The loan was transferred to special servicing in August 2009 due to imminent
default and is currently more than 90 days delinquent.
The remaining twelve loans are secured by a mix of office, industrial,
multifamily and retail properties. The master servicer has recognized
an aggregate $27.3 million appraisal reduction for four
of the specially serviced loans. Moody's has estimated an aggregate
$30.5 million loss (49% expected loss on average)
for the specially serviced loans.
Moody's has assumed a high default probability for four poorly performing
watchlisted loans representing 4% of the pool and has estimated
a $2.8 million loss (24% expected loss based on a
77% probability default) from these troubled loans.
Based on the most recent remittance statement, Classes J through
NR have experienced cumulative interest shortfalls totaling $2.4
million. Moody's anticipates that the pool will continue to experience
interest shortfalls because of the high exposure to specially serviced
loans. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate entitlement
reductions (ASERs) and extraordinary trust expenses.
Moody's was provided with full-year 2009 operating results for
93% of the non-defeased performing loans. Excluding
specially serviced and troubled loans, Moody's weighted average
LTV is 82% compared to 87% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 15.2%
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 1.25X and 1.41X, respectively,
compared to 1.21X and 1.36X 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
the risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 12
compared to 43 at Moody's prior review. The decline in Herf has
been largely offset by increased credit support due to loans payoffs and
The top three performing non-defeased loans represent 14%
of the pool balance. The largest loan is the Friedman Portfolio
Loan ($16.5 million -- 6.2%
of the pool), which is secured by three mixed use (office and retail)
properties located in Chicago, Illinois. The properties total
169,000 square feet and were approximately 87% leased as
of year-end 2009 compared to 92% at last review.
Overall, the portfolio's performance has been relatively stable.
Moody's LTV and stressed DSCR are 80% and 1.40X, respectively,
compared to 81% and 1.39X at last review.
The second largest loan is the Seatac Village Shopping Center Loan ($14.0
million -- 5.3% of the pool), which
is secured by a 164,326 square foot anchored retail property located
in Federal Way, Washington. Major tenants include T.J.
Maxx, DSW, and Trader Joe's. The center was 72%
leased as of June 2010 compared to 74% at year-end 2009.
Linens N Things, which leased 20% of the net rentable area
(NRA) at securitization, vacated in 2008. Several other tenants
that had co-tenancy subsequently vacated as well. The loan
had an anticipated payment date (ARD) of September 1, 2009.
The loan has amortized 3% since last review. Moody's LTV
and stressed DSCR are 91% and 1.19X, respectively,
compared to 113% and 0.91X at last review.
The third largest loan is the Burlington Self Storage Loan ($7.2
million -- 2.7% of the pool), which
is secured by a self storage facility located in Burlington, Massachusetts.
The property was 86% leased as of October 2009 compared to 81%
at year-end 2009. The loan matured at the end of August
2010 and per the servicer has been paid off in full.
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'
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.
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 Three, Upgrades Two, Confirms One, and Affirms Six CMBS Classes of SMB7 2000-C3
250 Greenwich Street
New York, NY 10007