Approximately $54 Million of Structure Securities Affected
New York, April 27, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of two classes,
confirmed one class and affirmed three classes of GMAC Commercial Mortgage
Securities, Inc. Mortgage Pass-Through Certificates,
Series 1999-C3 as follows:
X, Affirmed at Aaa (sf); previously on Sep 13, 1999 Definitive
Rating Assigned Aaa (sf)
G, Confirmed at A1 (sf); previously on Mar 2, 2011 A1
(sf) Placed Under Review for Possible Downgrade
H, Downgraded to B1 (sf); previously on Mar 2, 2011 Ba2
(sf) Placed Under Review for Possible Downgrade
J, Downgraded to Caa1 (sf); previously on Mar 2, 2011
B3 (sf) Placed Under Review for Possible Downgrade
K, Affirmed at C (sf); previously on Oct 28, 2010 Downgraded
to C (sf)
L, Affirmed at C (sf); previously on Mar 8, 2007 Downgraded
to C (sf)
RATINGS RATIONALE
The downgrades are due to an increase in interest shortfalls from specially
serviced loans.
The confirmation and 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 their current ratings.
On March 2, 2011 Moody's placed three classes on review for possible
downgrade due to an anticipated increase in interest shortfalls.
This action concludes our review. The master servicer, Berkadia
Commercial Mortgage LLC (Berkadia) had previously advised Moody's
that it would recover approximately $600,000 of outstanding
advances on a specially serviced loan, the Jewelry Building ($6.5
million -- 12.1% of the pool) beginning in March.
The servicer has already recovered most of the advances it currently plans
to recover and the amount of outstanding advances on the Jewelry Building
loan has decreased from approximately $1.0 million to approximately
$412,000. Berkadia spread out its recoveries and the
two classes with investment grade ratings (Classes G & X) received
timely payment of all accrued interest during the advance recovery period.
Moody's rating action reflects a cumulative base expected loss of 25.1%
of the current balance as compared to 34% at last review.
Moody's stressed scenario loss is 27.7%. 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 methodologies used in this rating were "Moody's Approach
to Rating Fusion U.S. CMBS Transactions", published
April 2005 and "U.S. CMBS: Moody's Approach To Surveillance
Of Large Loan Transactions" published March 2006.
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 3 compared
to 2 at last review.
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 October 28, 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 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 six months.
DEAL PERFORMANCE
As of the April 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $53.7
million from $1.15 billion at securitization. The
Certificates are collateralized by 11 mortgage loans ranging in size from
1% to 15% of the pool, with the top ten loans representing
99% of the pool. Two loans, representing 29%
of the pool, have defeased and are collateralized by U.S.
Government securities.
One loan, representing 4% of the pool, is on the master
servicer's watchlist. The watchlist includes loans which meet certain
portfolio review guidelines established as part of the CRE Finance Council's
(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.
Sixteen loans have been liquidated from the pool since securitization,
resulting in an aggregate $22 million loss (14% loss severity
on average). The pool had experienced a $19.7 million
loss at Moody's prior review. Currently six loans, representing
55% of the pool, are in special servicing. All of
the loans in special servicing were transferred due to imminent maturity
default. The largest specially serviced loan is the Lakeside Place
Office Building Loan ($6.5 million - 12% of
the pool), which is secured by a 84,000 square foot office
building located in Cleveland, Ohio. The loan was transferred
to special servicing in May 2009. The servicer has recognized a
$4.0 million appraisal reduction on the loan. The
remaining five specially serviced loans are secured by a mix of office,
industrial and retail properties.
Based on the most recent remittance statement, Classes H through
N have experienced cumulative interest shortfalls totaling $4.3
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.
The pool contains only three loans that are not defeased and not in special
servicing. Moody's was provided with full year 2009 and partial
year 2010 for all three of those loans. Excluding specially serviced
loan and troubled loans, Moody's weighted average LTV is 73%
as compared to 68% at last review. Moody's net cash flow
reflects a weighted average haircut of 14% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 9.6%.
Excluding specially serviced loan and troubled loans, Moody's actual
and stressed DSCRs are 1.29X and 1.52X, respectively,
compared to 1.34X and 1.64X 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 stressed DSCR is greater than the actual DSCR for this deal because
the pool's loans are at or near maturity and the actual debt constant
is greater than Moody's 9.25% stressed rate.
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 and 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 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.
New York
Peter Simon
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
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 Two, Confirms One and Affirms Three CMBS Classes of GMAC 1999-C3
