Approximately $64.0 Million of Structured Securities Affected
New York, March 31, 2011 -- Moody's Investors Service (Moody's) upgraded the ratings of four classes
and affirmed five classes of Salomon Brothers Securities VII, Inc.,
Commercial Mortgage Pass-Through Certificates, Series 2000-C1
Cl. X, Affirmed at Aaa (sf); previously on Mar 7,
2001 Definitive Rating Assigned Aaa (sf)
Cl. F, Upgraded to Aaa (sf); previously on Jul 30,
2010 Upgraded to Aa3 (sf)
Cl. G, Upgraded to Aaa (sf); previously on Jul 30,
2010 Upgraded to A2 (sf)
Cl. H, Affirmed at Ba1 (sf); previously on Mar 7,
2001 Definitive Rating Assigned Ba1 (sf)
Cl. J, Affirmed at Ba3 (sf); previously on Jul 30,
2010 Downgraded to Ba3 (sf)
Cl. K, Upgraded to Caa1 (sf); previously on Jul 30,
2010 Downgraded to Ca (sf)
Cl. L, Upgraded to Caa3 (sf); previously on Jul 30,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Jul 30,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Jul 30,
2010 Downgraded to C (sf)
The upgrades are due to increased credit subordination, overall
improved pool performance, and better than expected resolution of
several loans that were in special servicing at last review. Since
the prior review, realized losses have increased by $1.2
million while $7.6 million in losses were expected on the
loans liquidated from the pool.
The 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.
Moody's rating action reflects a cumulative base expected loss of
15.0% of the current balance. At last review,
Moody's cumulative base expected loss was 20.5%.
Moody's stressed scenario loss is 18.8% 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
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 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
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 Transactions" published in April 2005
and "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
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 credit estimate 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 credit estimate 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 5 compared
to 7 at Moody's prior 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 July 30, 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
As of the March 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 91% to $64.0
million from $713.3 million at securitization. The
Certificates are collateralized by 25 mortgage loans ranging in size from
less than 1% to 38% of the pool, with the top ten
loans representing 77% of the pool. Six loans, representing
12% of the pool, have defeased and are collateralized by
U.S. Government securities.
One loan, representing 2% 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 (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.
Eighteen loans has been liquidated from the pool, resulting in a
realized loss of $19 million (29% loss severity overall).
Eight loans, representing approximately 21% of the pool,
are currently in special servicing. All of these loans have passed
their respective maturity dates. The largest specially serviced
loan is the Groesbeck Industrial park Loan ($3.0 million
-- 4.7% of the pool), which is secured by a 150,000
square foot industrial building located in a suburb of Detroit in Mount
Clemens, Michigan. The loan was transferred to special servicing
in June 2009 due to imminent maturity default and is currently in foreclosure.
As of August 2010, the property was 67% leased.
The remaining seven specially serviced loans are secured by a mix of property
types. Moody's estimates an aggregate $8.1 million
loss for eight of the specially serviced loans (overall 59% expected
Moody's has assumed a high default probability for one poorly performing
loan representing 2% of the pool and has estimated a $223,000
loss (15% expected loss based on a 50% probability default)
from this troubled loan.
Moody's was provided with full year 2009 operating results for 100%
of the pool (excluding defeased and specially serviced loans).
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 68%, the same as at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 13%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 10.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.25X and 1.79X, respectively,
compared to 1.25X and 1.75X 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 top three non-defeased conduit loans represent 56% of
the pool. The largest loan is the Putnam Building Loan ($24.4
million -- 37.9% of the pool), which is secured
by a 231,000 square foot office building located in Norwood,
Massachusetts, approximately 13 miles southwest of Boston.
Built in 1978, the property is 100% triple net leased to
Putnam Investments, a subsidiary of Great-West Life Assurance
Company (Moody's senior unsecured rating Aa3; stable outlook) through
July 2013. Performance remains in-line with last review.
Moody's LTV and stressed DSCR are 81% and 1.26X compared
to 82% and 1.25X, respectively, at last review.
The second largest conduit loan is the Sports Arena Village Loan ($7.6
million -- 11.8% of the pool), which is secured
by a 282,000 square foot retail and office property located in San
Diego, California. As of December 2010, the property
was 90% leased compared 92% at last review. The largest
tenant is Science Applications Corp. (24% of the net rentable
area (NRA); lease expires in August 2015). Property performance
has improved since last review. The loan is fully amortizing and
has amortized 41% since securitization. The loan matures
in June 2018. Moody's LTV and stressed DSCR are 36% and
3.26X, respectively, compared to 39% and 3.04X,
respectively, at last review.
The third largest conduit loan is The Sports Authority Loan ($3.9
million -- 6% of the pool), which is secured
by a 46,000 square foot retail property located along the Northern
Boulevard retail corridor in Long Island City, New York.
The property is 100% leased to The Sports Authority through February
2015. Performance remains in-line with last review.
The loan matures in February 2015 and has amortized 13% since securitization.
Moody's LTV and stressed DSCR are 61% and 1.65X compared
to 61% and 1.63X, respectively, at last review.
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
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 Upgrades Four and Affirms Five CMBS Classes of SBM7 2000-C1
250 Greenwich Street
New York, NY 10007