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Rating Action:

Moody's Upgrades One Class, Affirms Six Classes and Downgrades One CMBS Class of LB-UBS 2004-C2

15 May 2014

Approximately $65.1 Million of Structured Securities Affected

New York, May 15, 2014 -- Moody's Investors Service upgraded one class, affirmed the ratings of six classes and downgraded one CMBS class of LB-UBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2004-C2 as follows:

Cl. G, Upgraded to Baa3 (sf); previously on Sep 12, 2013 Affirmed Ba2 (sf)

Cl. H, Affirmed B1 (sf); previously on Sep 12, 2013 Affirmed B1 (sf)

Cl. J, Affirmed Caa2 (sf); previously on Sep 12, 2013 Downgraded to Caa2 (sf)

Cl. K, Affirmed C (sf); previously on Sep 12, 2013 Downgraded to C (sf)

Cl. L, Affirmed C (sf); previously on Sep 12, 2013 Affirmed C (sf)

Cl. M, Affirmed C (sf); previously on Sep 12, 2013 Affirmed C (sf)

Cl. N, Affirmed C (sf); previously on Dec 17, 2010 Downgraded to C (sf)

Cl. X-CL, Downgraded to Caa2 (sf); previously on Sep 12, 2013 Affirmed Ba3 (sf)

RATINGS RATIONALE

The upgrade was due to increased credit support from loan pay downs and amortization. The deal has paid down 84% since last review. The ratings on six P&I classes were affirmed because their ratings are consistent with Moody's expected loss. The rating on the IO class was downgraded due to a decline in the credit performance of its reference classes resulting from principal pay downs of higher quality reference classes.

Moody's rating action reflects a base expected loss of 37.7% of the current balance, compared to 6.8% at Moody's last review. However, on a numeric basis, the current base expected loss totals $24.6 million compared to $27.3 million at last review. Accordingly, Moody's base expected loss plus realized losses is now 4.1% of the original pooled balance compared to 4.4% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan pay downs or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

DESCRIPTION OF MODELS USED

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of four compared to eleven at last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan 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. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

Since 45% of the pool is in special servicing, Moody's also utilized a loss and recovery approach in determining an internal credit assessment for the non-rated P&I classes, which in turn is used to determine the rating for the rated, IO Class. In this approach, Moody's determines a probability of default for each specially serviced loan and determines a most probable loss given default based on a review of broker's opinions of value (if available), other information from the special servicer and available market data. The loss given default for each loan also takes into consideration servicer advances to date and estimated future advances and closing costs. Translating the probability of default and loss given default into an expected loss estimate, Moody's then applies the aggregate loss from specially serviced loans to the most junior class(es) and the recovery as a pay down of principal to the most senior class(es).

DEAL PERFORMANCE

As of the April 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 95% to $65.1 million from $1.2 billion at securitization. The Certificates are collateralized by 10 mortgage loans ranging in size from less than 1% to 32% of the pool. Two loans representing 23% of the pool have defeased and are secured by U.S. Government securities.

There are no loans 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.

Eight loans have been liquidated from the pool, resulting in an aggregate realized loss of $25.8 million (20% loss severity). Currently seven loans, representing 45% of the pool, are in special servicing. The largest specially serviced loan is the Plaza Vista Mall Loan ($11.4 million -- 17.5% of the pool). This loan is secured by a 227,149 square foot (SF) retail center located in Sierra Vista, Arizona. As of March 2014 the property was 96% compared to 40% at last review. Hobby Lobby and C-A-L Ranch stores both signed leases for a total of 127,247 SF which yielded the 96% leased figure.

The second largest specially serviced loan is the Warm Springs Loan ($9.3 million -- 14.2% of the pool). This loan is secured by an office property located just south of McCarren airport in Las Vegas, Nevada. This loan transferred to special servicing in September 2012 due to GSA vacating, leaving the property 46% leased at last review compared to the current 69% leased figure as of February 2014. The special servicer is pursuing foreclosure.

The remaining specially serviced loans are represented by a mix of property types. Moody's has estimated an aggregate $22.3 million loss (77% expected loss on average) for the specially serviced loans.

Moody's was provided with full year 2011 and 2012 operating results for 100% of the pool's non-specially serviced and non-defeased loans and 100% of partial year 2013 operating results. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 107% compared to 81% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 12% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.75%.

Excluding special serviced and troubled loans, Moody's actual and stressed DSCRs are 1.02X and 0.99X, respectively, compared to 1.53X and 1.34X 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 one performing conduit loan represents 32% of the pool balance. The largest loan is the Voice Road Shopping Center ($20.8 million -- 32% of the pool), which is secured by a 131,452 SF retail property located in Carle Place, New York. The property was 100% leased as of June 2013 compared to 83% leased at last review. Moody's LTV and stressed DSCR are 107% and 0.99X, respectively, compared to 104% and 1.01X at last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's received and took into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments in this transaction and the assessment had a neutral impact on the credit rating.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Gregory Reed
Vice President - Senior Analyst
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

Sandra Ruffin
VP - Senior Credit Officer
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 One Class, Affirms Six Classes and Downgrades One CMBS Class of LB-UBS 2004-C2
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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