Approximately $226.5 Million of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of five classes,
downgraded two classes and affirmed six classes of Citigroup Commercial
Mortgage Securities Inc., Commercial Mortgage Pass-Through
Certificates, Series 2005-EMG as follows:
Cl. A-4, Affirmed at Aaa (sf); previously on
Jul 13, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at Aaa (sf); previously on
Jul 13, 2005 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Jul 13,
2005 Definitive Rating Assigned Aaa (sf)
Cl. B, Upgraded to Aaa (sf); previously on Nov 13,
2007 Upgraded to Aa1 (sf)
Cl. C, Upgraded to Aaa (sf); previously on Nov 13,
2007 Upgraded to Aa2 (sf)
Cl. D, Upgraded to Aa3 (sf); previously on Jul 13,
2005 Definitive Rating Assigned A2 (sf)
Cl. E, Upgraded to A2 (sf); previously on Jul 13,
2005 Definitive Rating Assigned A3 (sf)
Cl. F, Upgraded to A3 (sf); previously on Jul 13,
2005 Definitive Rating Assigned Baa1 (sf)
Cl. G, Affirmed at Baa2 (sf); previously on Jul 13,
2005 Definitive Rating Assigned Baa2 (sf)
Cl. H, Affirmed at Baa3 (sf); previously on Jul 13,
2005 Definitive Rating Assigned Baa3 (sf)
Cl. J, Affirmed at Ba1 (sf); previously on Jul 13,
2005 Definitive Rating Assigned Ba1 (sf)
Cl. K, Downgraded to B2 (sf); previously on Jul 23,
2009 Downgraded to B1 (sf)
Cl. L, Downgraded to Caa1 (sf); previously on Jul 23,
2009 Downgraded to B2 (sf)
RATINGS RATIONALE
The upgrades are due to the significant increase in subordination due
to loan payoffs and amortization. The pool has paid down by 39%
since Moody's last review.
The downgrades are due to higher expected losses due to increased credit
quality dispersion.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, the Herfindahl Index (Herf) and Moody's stressed
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.
Moody's rating action reflects a cumulative base expected loss of 1.6%
of the current balance. At last review, Moody's cumulative
base expected loss was 1.0%. Moody's stressed scenario
loss is 4.1% 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 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 methodology used in these ratings was "CMBS: Moody's
Approach to Rating Fusion Transactions" published in April 2005.
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 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 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 23, 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 six months
DEAL PERFORMANCE
As of the November 22, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 68% to $228.2
million from $722.1 million at securitization. The
Certificates are collateralized by 112 mortgage loans ranging in size
from less than 1% to 4% of the pool, with the top
ten loans representing 24% of the pool. There are four loans,
representing 21% of the pool, with investment grade credit
estimates. At securitization, three additional loans had
credit estimates. These loans have been paid off since last review.
Fourteen loans, representing 6% 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.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $40,305 (less than 1% loss
severity overall). One loan is currently in special servicing.
This loan is the 13-06 43rd Avenue Loan ($621,341
-- 0.3% of the pool), which is secured by a 37,500
square foot industrial building located in Long Island City, New
York. The loan was transferred to special servicing in January
2010 due to imminent maturity default. The loan has been extended
to March 2012 and is pending return to the master servicer. Moody's
does not anticipate a loss on this loan.
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 53
compared to 62 at Moody's prior review.
Moody's was provided with full year 2009 operating results for 99%
of the pool. Moody's weighted average LTV is 40% compared
to 37% at last review. Although the pool's overall performance
has been stable, the pool has experienced increased credit quality
dispersion. Based on Moody's analysis, 9% of the pool
has an LTV over 100% compared to 1% at last 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 9.2%.
Moody's actual and stressed DSCRs are 3.73X and 4.47X,
respectively, compared to 3.44X and 3.79X 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 largest loan with a credit estimate is the 50 East 42nd Street Loan
($15.0 million -- 6.6%), which
is secured by a 144,378 square foot mixed use property located in
midtown Manhattan. The property was 91% leased as of December
2009 compared to 84% at last review. Performance has improved
since last review due to increased occupancy. Moody's credit
estimate and stressed DSCR are Aa3 and 1.95X, respectively,
compated to A2 and 1.59X at last review.
The second loan with a credit estimate is the 1001 Central Park Avenue
Loan ($14.0 million; - 6.1%),
which is secured by a 238,700 square foot retail center located
in Scarsdale, New York. The property was 87% leased
as of December 2009 compared to 68% at last review. Despite
the increased occupancy, performance is in-line with last
review. Moody's credit estimate and stressed DSCR are A3
and 1.86X, respectively, compared to A3 and 1.95X
at last review.
The third loan with a credit estimate is the 6 West 32nd Street Loan ($11.5
million -- 5.0%), which is secured by a 171-room
hotel located in midtown Manhattan. Performance has been stable.
Moody's credit estimate and stressed DSCR are Baa1 and 1.98,
respectively, compared to Baa1 and 2.28X at last review.
The fourth loan with a credit estimate is the 295 Park Avenue South Loan
($8.3 million; - 3.6%),
which is secured by a 179 unit-multifamily property located in
midtown Manhattan. The property was 99% leased as of December
2009, the same as at last review. Performance has been strong
due to increasing rental revenues. Moody's credit estimate
and stressed DSCR are Aaa and 6.35, respectively, compared
to Aaa and 4.36X at last review
The top three performing conduit loans represent 9% of the pool
balance. The largest loan is the 18-28 West 33rd Street
Loan ($8 million -- 3.5% of the pool),
which is secured by a 183,750 square foot office building in Manhattan.
The property was 98% leased as of December 2009, the same
as at last review. Property performance has improved since last
review and securitization due to an increase in rental revenue.
Moody's LTV and stressed DSCR are 56% and 1.88X, respectively,
compared to 70% and 1.50X at last review.
The second largest loan is the 425 Madison Avenue Loan ($7.1
million -- 3.1% of the pool), which is secured
by a 79,335 square foot office building located in Manhattan.
The building was 100% leased as of December 2009, the same
as at last review. Performance has been stable and the loan has
amortized 3% since last review. Moody's LTV and stressed
DSCR are 31% and 3.42X, compared to 34% and
3.11X at last review.
The third largest loan is the 22 West 34th Street Loan ($5.9
million -- 2.6% of the pool), which is secured
by a 88,747 square foot mixed use property located in Manhattan.
The property was 100% leased as of December 2009, the same
as at last review. Property performance has been stable and the
loan has amortized 3% since last review. Moody's LTV and
stressed DSCR are 28% and 3.83X, respectively,
compared to 29% and 3.78X 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 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 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
Christie Edwards
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 Upgrades Five, Downgrades Two and Affirms Six CMBS Classes of CGCMT 2005-EMG
