Approximately $77.1 Million of Structured Securities Affected
New York, July 10, 2014 -- Moody's Investors Service has upgraded the rating on one class,
downgraded the ratings on four classes, and affirmed the ratings
on two classes in Wachovia Bank Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 2003-C7
as follows:
Cl. D, Upgraded to Aaa (sf); previously on Aug 8,
2013 Affirmed Aa2 (sf)
Cl. E, Affirmed A3 (sf); previously on Aug 8,
2013 Affirmed A3 (sf)
Cl. F, Affirmed Ba1 (sf); previously on Aug 8,
2013 Affirmed Ba1 (sf)
Cl. G, Downgraded to Caa2 (sf); previously on Aug 8,
2013 Affirmed B1 (sf)
Cl. H, Downgraded to C (sf); previously on Aug 8,
2013 Affirmed B3 (sf)
Cl. J, Downgraded to C (sf); previously on Aug 8,
2013 Affirmed Caa2 (sf)
Cl. X-C, Downgraded to Caa3 (sf); previously
on Aug 8, 2013 Downgraded to B1 (sf)
RATINGS RATIONALE
The rating on class D was upgraded due to an increase in credit support
since last review as the result of paydown and scheduled amortization.
The deal has paid down 74% since last review.
The ratings on P&I classes E and F were affirmed because the transaction's
key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable ranges.
The ratings on classes G, H, and J were downgraded due to
anticipated realized losses from the loan in special servicing and troubled
loans.
The rating on the IO class (Class X-C) was downgraded based on
the weighted average rating factor of the referenced classes.
Moody's rating action reflects a base expected loss of 36.5%
of the current balance compared to 21.5% at Moody's last
review. Moody's base expected loss plus realized losses is now
7.3% of the original pooled balance, compared to 7.0%
at the last review. Moody's provides a current list of base expected
losses for conduit and fusion CMBS transactions on moodys.com at
http://www.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 paydowns 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 methodologies used in this rating were "Moody's Approach to
Rating U.S. CMBS Conduit Transactions" published in September
2000, and "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 these
methodologies.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model v 2.64,
which it uses for both conduit and fusion transactions. Conduit
model results at the Aa2 (sf) level are driven by property type,
Moody's actual and stressed DSCR, and Moody's property quality grade
(which reflects the capitalization rate Moody's uses to estimate Moody's
value). Conduit model results at the B2 (sf) level are based on
a paydown analysis using the individual loan-level Moody's LTV
ratio. Moody's may consider other concentrations and correlations
in its analysis. Based on the model pooled credit enhancement levels
of Aa2 (sf) and B2 (sf), the required credit enhancement on 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, Moody's merges the credit
enhancement for loans with investment-grade structured credit assessments
with the conduit model credit enhancement for an overall model result.
Moody's incorporates negative pooling (adding credit enhancement at the
structured credit assessment level) for loans with similar structured
credit assessments in the same transaction.
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 6 compared
to 33 at Moody's last 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 8.7 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.
DEAL PERFORMANCE
As of the June 10, 2014 distribution date, the transaction's
aggregate certificate balance has decreased by 92% to $77.1
million from $1.012 billion at securitization. The
Certificates are collateralized by 18 mortgage loans ranging in size from
less than 1% to 33% of the pool, with the top ten
loans representing 89% of the pool. Two loans, representing
3% of the pool, have defeased and are secured by U.S.
Government securities.
Two loans, constituting 18% of the pool, are on the
master servicer's watchlist. The watchlist includes loans that
meet certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, the agency reviews the watchlist
to assess which loans have material issues that could affect performance.
Four loans have been liquidated from the pool, contributing to an
aggregate realized loss of $45.5 million. One loan,
constituting 33% of the pool, is currently in special servicing.
The specially serviced loan is the Columbia Place Mall Loan ($25.5
million -- 33.1% of the pool), which is secured
by a regional mall located in Columbia, South Carolina. The
mall totals 970,000 square feet (SF), of which approximately
391,611 SF serves as loan collateral. The loan was transferred
to special servicing in January 2012 for imminent default. The
properly was 86% leased as of June 2013. A note sale is
pending subject to approval. An appraisal dated from April 2013
valued the property at $7.5 million.
Moody's has assumed a high default probability for two poorly performing
loans, constituting 18% of the pool. The estimated
an aggregate loss for troubled and specially serviced loans is $27.6
million.
Moody's received full year 2013 operating results for 98% of the
pool and partial year 2014 operating results for 58% of the pool.
Moody's weighted average conduit LTV is 70% compared to 80%
at Moody's last review. Moody's conduit component excludes defeased,
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 12% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.1%.
Moody's actual and stressed conduit DSCRs are 1.21X and 1.52X,
respectively, compared to 1.34X and 1.26X at the last
review. Moody's actual DSCR is based on Moody's NCF and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stress rate the agency applied to the loan
balance.
The top three performing conduit loans represent 34% of the pool
balance. The largest loan is the Sea Breeze Village Loan ($8.8
million -- 11.4% of the pool), which is secured
by a 53,000 square foot (SF) retail property located in Las Vegas,
Nevada. Various retail and restaurant tenants occupy the property.
The loan is amortizing with a maturity date of August 2015. Moody's
LTV and DSCR are 86% and 1.17X, respectively,
compared to 86% and 1.29X at last review.
The second largest loan is the Plaza de Laredo Loan ($8.7
million -- 11.3% of the pool), which is secured
by a 244,090 SF retail property located in Laredo. Texas.
The largest tenants are Home Depot and Office Depot. As of March
2014, the property was 99% leased. The loan is amortizing
and matures in October 2023. Moody's LTV and DSCR are 69%
and 1.46X, respectively, compared to 70% and
1.30X at last review.
The third largest loan is the Acacia Court Loan ($8.6 million
-- 11.2% of the pool), which is secured by a
105,100 SF retail property located in Tempe, Arizona.
As of January 2014, the property was 78% leased. The
loan is on the watchlist and Moody's has identified this loan as
a troubled loan due to the decrease in Net Cash Flow.
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 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.
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.
Lacey M Morgan
Associate 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
Annelise Osborne
VP - Sr Credit Officer/Manager
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, Downgrades Four, and Affirms Two Classes of WBCMT 2003-C7
