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I AGREE
22 Apr 2011
Approximately $110.8 Million of Structured Securities Affected
New York, April 22, 2011 -- Moody's Investors Service (Moody's) upgraded the ratings of four classes
of An Affiliate of Entertainment Properties Trust, Commercial Pass-Through
Certificates, Series 2003-EPR. Moody's also
affirmed three classes. Moody's rating action is as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Feb 24, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Feb 24, 2003 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Jun 17,
2010 Upgraded to Aaa (sf)
Cl. C, Upgraded to Aa1 (sf); previously on Jun 17,
2010 Upgraded to Aa2 (sf)
Cl. D, Upgraded to Aa2 (sf); previously on Jun 17,
2010 Upgraded to Aa3 (sf)
Cl. E, Upgraded to A1 (sf); previously on Jun 17,
2010 Upgraded to A2 (sf)
Cl. F, Upgraded to A3 (sf); previously on Jun 17,
2010 Upgraded to Baa1 (sf)
RATINGS RATIONALE
The upgrades and affirmations are based on the quality of the collateral,
the credit enhancement furnished by the subordinate tranches, and
the structural and legal integrity of the transaction, along with
key parameters, including Moody's loan to value (LTV) ratio
and Moody's stressed debt service coverage ratio (DSCR) remaining
within acceptable ranges.
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 Large Loan/Single Borrower Transactions", published
in July 2000.
Moody's review incorporated the use of the excel-based CMBS Large
Loan Model v 8.0 which is used for both large loan and single borrower
transactions. 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 also incorporates a
supplementary tool to allow for the testing of the credit support at various
rating levels. The scenario or "blow-up" analysis tests
the credit support for a rating assuming that loans in the pool default
with an average loss severity that is commensurate with the rating level
being tested.
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 17, 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 Payment Date, the transaction's
certificate balance has decreased by approximately 29% to $110.8
million from $155.5 million at securitization due to loan
amortization based on a 20-year amortization schedule. The
Certificates are collateralized by a single mortgage loan. The
collateral for the transaction consists of 15 stand-alone movie
theaters (292 screens) located in ten different states. Five theaters
(28% of base rental income), with a total of 68 screens,
are located in New Orleans, LA. The borrower is Flik,
Inc., a wholly-owned subsidiary of Entertainment Properties
Trust (EPR). EPR leases 14 of the properties directly to movie
theater operators including American Multli-Cinema, Inc.
(AMC -- 11 theaters; 79% of base rental income),
affiliates of Consolidated Theater Holding (Consolidated --
two theaters; 16% of base rental revenue), Loews Cineplex
Entertainment Corp. (Loews -- one theater; 6%
of base rental revenue), and Muvico Entertainment LLC (Muvico -
one theater; 7% of base rental income). In one of the
properties, EPR leases the fee parcel to an affiliate and the affiliate
in turn subleases the ground parcel and improvements to AMC. All
the leases are triple net and have 15 to 20-year terms plus extension
options.
Many of the theaters in the portfolio are among the top performing theaters
in their respective markets. For calendar year 2010 average revenue
per screen for the portfolio was $507,125, a 0.5%
decline from 2009 which is consistent with the U.S./Canada
market trend. Portfolio performance was more than twice the $245,500
per screen average in the U.S/Canada market, as reported
by the Motion Picture Association of America. The three top performers
in the portfolio were the Clearview AMC 12 in New Orleans, Louisiana
($873,833 per screen), the AMC Hoffman Town Center
22 in Alexandria, Virginia ($798,864 per screen) and
the AMC Elmwood Palace 20 in Harahan, Louisiana ($729,500
per screen. The theater with the lowest performance was the Consolidated
Cherrydale 16 in Greenville, South Carolina ($298,098
per screen). At securitization the portfolio average revenue per
screen was $541,277, seven percent higher than in 2010.
Moody's loan to value ("LTV") ratio is 57%, compared to 61%
at last review. Moody's stressed debt service coverage ("DSCR")
is 2.15X, compared to 2.02X at last review.
REGULATORY DISLOSURES
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
Jay Rosen
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Michael M. Gerdes
Senior Vice President
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 Four Classes and Affirms Three Classes of An Affiliate of Entertainment Properties Trust 2003-EPR
No Related Data.
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