Approximately $400 million of Structured Securities Affected
New York, May 30, 2013 -- Moody's Investors Service (Moody's) upgraded eleven classes, four
of which were also Placed on Review for Possible Upgrade, and affirmed
one class of Banc of America Large Loan, Inc. Commercial
Mortgage Pass-Through Certificates, Series 2007-BMB1.
Cl. A-2, Upgraded to Aaa (sf); previously on
Nov 17, 2011 Downgraded to Aa1 (sf)
Cl. B, Upgraded to Aaa (sf); previously on Nov 17,
2011 Downgraded to A1 (sf)
Cl. C, Upgraded to Aa2 (sf) and Placed Under Review for Possible
Upgrade; previously on Nov 17, 2011 Downgraded to A3 (sf)
Cl. D, Upgraded to Aa3 (sf) and Placed Under Review for Possible
Upgrade; previously on Nov 17, 2011 Downgraded to Baa1 (sf)
Cl. E, Upgraded to A1 (sf) and Placed Under Review for Possible
Upgrade; previously on Nov 17, 2011 Downgraded to Baa2 (sf)
Cl. F, Upgraded to A3 (sf) and Placed Under Review for Possible
Upgrade; previously on Nov 17, 2011 Downgraded to Baa3 (sf)
Cl. G, Upgraded to Baa1 (sf); previously on Nov 17,
2011 Downgraded to Ba1 (sf)
Cl. H, Upgraded to Ba1 (sf); previously on Nov 17,
2011 Downgraded to Ba3 (sf)
Cl. J, Upgraded to Ba3 (sf); previously on Nov 17,
2011 Confirmed at B2 (sf)
Cl. K, Upgraded to B2 (sf); previously on Nov 17,
2011 Confirmed at Caa2 (sf)
Cl. L, Upgraded to Caa3 (sf); previously on Dec 2,
2010 Downgraded to C (sf)
Cl. X, Affirmed Ba3 (sf); previously on Feb 22,
2012 Downgraded to Ba3 (sf)
RATINGS RATIONALE
The upgrades are due to the payoff of four loans and the paydown of one
loan decreasing the pool balance by 52% since last review.
The four classes that were placed Under Review for Possible Upgrade will
remain under review until Moody's receives more clarity on the refinance
of the Blackstone Hotel Portfolio. The rating of the IO Class,
Class X, is consistent with the expected credit performance of its
referenced classes and thus is affirmed.
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. From
time to time, Moody's may, if warranted, change these
expectations. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker than
Moody's had anticipated when the related securities ratings were issued.
Even so, a deviation from the expected range will not necessarily
result in a rating action nor does performance within expectations preclude
such actions. The decision to take (or not take) a rating action
is dependent on an assessment of a range of factors including, but
not exclusively, the performance metrics.
Primary sources of assumption uncertainty are the extent of growth in
the current macroeconomic environment given the weak pace of recovery
in the commercial real estate property markets. Commercial real
estate property values are continuing to move in a modestly positive direction
along with a rise in investment activity and stabilization in core property
type performance. Limited new construction and moderate job growth
have aided this improvement. However, a consistent upward
trend will not be evident until the volume of investment activity steadily
increases for a significant period, non-performing properties
are cleared from the pipeline, and fears of a Euro area recession
are abated.
The hotel sector continues to exhibit growth albeit at a slightly slower
pace. The multifamily sector should remain stable with moderate
growth. Gradual recovery in the office sector continues and will
be assisted in the next quarter when absorption is likely to outpace completions.
However, since office demand is closely tied to employment,
we expect regional employment growth to provide market differentiation.
CBD markets continue to outperform secondary suburban markets.
The retail sector exhibited a slight reduction in vacancies in the first
quarter; the largest drop since 2005. However, consumers
continue to be cautious as evidenced by sales growth continuing below
historical trends. Across all property sectors, the availability
of debt capital continues to improve with robust securitization activity
of commercial real estate loans supported by a monetary policy of low
interest rates.
Moody's central global macroeconomic outlook indicates the global
economy has lost momentum over the past quarter as it tries to recover.
US GDP growth for 2013 is likely to remain close to 2%, however
US sequestration cuts that came into effect in March may create a drag
on the positive growth in the US private sector. While the broad
economic impact in unclear, the direct effect is likely to shave
0.4% off US GDP growth in 2013. Continuing from the
previous quarter, Moody's believes that the three most immediate
risks are: i) the risk of an even deeper than currently expected
recession in the euro area, accompanied by deeper credit contraction,
potentially triggered by a further intensification of the sovereign debt
crisis; ii) slower-than-expected recovery in major
emerging markets following the recent slowdown; and iii) an escalation
of geopolitical tensions, resulting in adverse economic developments.
The principal methodology used in this rating was "Moody's Approach to
Rating CMBS Large Loan/Single Borrower Transactions" published in July
2000. The methodology used in rating Class X was "Moody's Approach
to Rating Structured Finance Interest-Only Securities" published
in February 2012. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.5. 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. The model incorporates the CMBS
IO calculator ver1.1 that uses the following inputs to calculate
the proposed IO rating based on the published methodology: original
and current bond ratings and credit assessments; original and current
bond balances grossed up for losses for all bonds the IO(s) reference(s)
within the transaction; and IO type corresponding to an IO type as
defined in the published methodology. The calculator then returns
a calculated IO rating based on both a target and mid-point .
For example, a target rating basis for a Baa3 (sf) rating is a 610
rating factor. The midpoint rating basis for a Baa3 (sf) rating
is 775 (i.e. the simple average of a Baa3 (sf) rating factor
of 610 and a Ba1 (sf) rating factor of 940). If the calculated
IO rating factor is 700, the CMBS IO calculator would provide both
a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating
committee.
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 a review utilizing MOST®
(Moody's Surveillance Trends) Reports and Remittance Statements.
On a periodic basis, Moody's also performs a full transaction review
that involves a rating committee and a press release. Moody's prior
transaction review is summarized in a presale report dated August 22,
2012. Please see the ratings tab on the issuer / entity page on
moodys.com for the last rating action and the ratings history.
DEAL PERFORMANCE
As of the May 15, 2013 distribution date, the transaction's
certificate balance decreased by approximately 77% to $400
million from $1.73 billion at securitization due to the
payoff of twelve loans and the principal pay down associated with one
loan. The Certificates are collateralized by two floating-rate
loans representing 75% and 25% of the pooled trust mortgage
balance.
The pool has experienced $10.9 million in losses due to
the liquidation of the Readers Digest loan in February 2012. There
are no interest shortfalls nor are any loans in special servicing.
Moody's weighed average pooled loan to value (LTV) ratio is 81%
compared to 78% at last review and 68% at securitization.
Moody's pooled stressed DSCR is 1.36X, compared to 1.41X
at last review and 1.50X at securitization.
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. Large loan transactions generally
have a Herf of less than 20. The pool has a Herf of 2, compared
to 4 at last review.
The largest pooled exposure is the Stamford Office Portfolio loan ($301.5
million; 75% of the pooled balance) which is secured by seven
office properties totaling 1.7 million square feet located in Stamford,
Connecticut. As of February 2013, the properties were 86%
leased with average in-place net rents of $40.23
per square foot. According to CBRE Econometric Advisors,
asking rents for Stamford Class A properties are $37.48
per square foot with a vacancy rate of 17.8%. The
loan was modified in 2010 and has an extended maturity date of August
2013 with a one-year extension remaining. The collateral
is encumbered with additional debt in the form of a $98.5
million subordinate mortgage and $400 million of mezzanine debt.
Moody's current pooled LTV is 91% and stressed DSCR is 1.07X.
Moody's current credit assessment is B2, the same as last review.
The Blackstone Hawaii Hotel Portfolio loan ($98.7 million;
25%) is the second largest loan in the pool and is secured by two
hotels located in Hawaii. The Marriott Wailea Beach Resort &
Spa is a 546-key hotel located on Maui. According to Smith
Travel Research, the hotel has shown revenue per available room
(RevPAR) increasing 8.4% for the trailing twelve month period
ending February 2013, which is slightly above than other Maui hotels
reporting RevPAR increases of 6.7% for the same period.
The Marriott Waikoloa Beach Resort & Spa is a 555-key hotel
located on the big island of Hawaii. The cash flow for this property
has been stressed. According to Smith Travel Research, the
hotel has shown revenue per available room (RevPAR) increase of 7.2%
for the trailing twelve month period ending February 2013, compared
to other Hawaii/Kauai hotels reporting RevPAR increases of 13.6%
for the same period. The portfolio is also encumbered by a subordinate
mortgage of $123 million. The final maturity date for the
loan is June 2013. Since last review, the pooled balance
has paid down 13%. Moody's current pooled LTV is 50%
and stressed DSCR is 2.25X. Moody's current credit assessment
is A3, compared to Baa3 last review.
REGULATORY DISCLOSURES
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
In conducting surveillance of this credit, Moody's considered performance
data contained in servicer and remittance reports. Moody's obtains
servicer reports on this transaction on a periodic basis, at least
annually.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Annelise Osborne
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Michael Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Upgrades 11 CMBS Classes and Affirms One CMBS Class of BALL 2007-BMB1
