Approximately $59.0 Million of Structured Securities Affected
New York, March 16, 2011 -- Moody's Investors Service (Moody's) upgraded the rating of one class and
affirmed four classes of Bear Stearns Commercial Mortgage Securities Inc.,
Commercial Mortgage Pass-Through Certificates, Series 1999-WF2
as follows:
Cl. X, Affirmed at Aaa (sf); previously on Jul 1,
1999 Assigned Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Sep 21,
2006 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Sep 21,
2006 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Oct 24,
2007 Upgraded to Aaa (sf)
Cl. F, Upgraded to Aaa (sf); previously on Sep 25,
2008 Upgraded to Aa1 (sf)
RATINGS RATIONALE
The upgrade is due to increased subordination due to paydowns and amortization
and overall stable pool performance. 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 the existing ratings.
Moody's rating action reflects a cumulative base expected loss of 3.6%
of the current balance. Moody's stressed scenario loss is 6.9%
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 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 Conduit Transactions" published in September 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 pay
down 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
underlying ratings 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 underlying rating 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 20,
compared to 87 at Moody's prior full review. The decline in Herf
has been partially offset by increased subordination due to loan payoffs
and amortization.
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 October 24, 2007.
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 February 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 88% to $125.7
million from $1.08 billion at securitization. The
Certificates are collateralized by 71 mortgage loans ranging in size from
less than 1% to 9% of the pool, with the top ten non-defeased
loans representing 40% of the pool. Twelve loans,
representing 13% of the pool, have defeased and are secured
by U.S. Government securities.
Eight loans, representing 8% 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. 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.
Ten loans have been liquidated from the pool since securitization,
resulting in an aggregate $14.1 million loss (31%
loss severity on average). Seven loans, representing 18%
of the pool, are currently in special servicing. Moody's
has estimated an aggregate $2.7 million loss (27%
expected loss on average) for the specially serviced loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 100% and 72%, respectively, of the
pool's non-defeased performing loans. Excluding specially
serviced loans, Moody's weighted average LTV is 48% compared
to 66% at Moody's prior full 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 9.6%.
Excluding specially serviced loans, Moody's actual and stressed
DSCRs are 1.57X and 2.83X, respectively, compared
to 1.71X and 2.02X at Moody's prior full 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 performing conduit loans represent 25% of the pool
balance. The largest loan is a portfolio of four cross-collateralized
and cross-defaulted movie theaters ($17.2 million
-- 13.7% of the pool), totaling 258,740
square feet (SF) and located in metropolitan St. Louis, Missouri.
The properties are 100% leased to a single-tenant through
January 2019. The loans are fully amortizing and are co-terminus
with the lease expirations. Moody's LTV and stressed DSCR are 42%
and 2.46X, respectively, compared to 53% and
1.96X at Moody's last full review.
The second largest loan is the AMC Theatres Loan ($10.7
million -- 8.5%), which is secured by a 90,000
SF movie theater located in Westminster, Colorado. The property
is leased to a single tenant through April 2018. The loan,
which is fully amortizing, has paid down 22% since Moody's
last full review and matures in July 2018. Moody's LTV and stressed
DSCR are 48% and 2.39X, respectively, compared
to 65% and 1.74X at last full review.
The third largest loan is The Bay Club Hotel & Marina Loan ($4.0
million -- 3.2%), which is secured by a 105-room
hotel located in San Diego, California. The loan is benefiting
from amortization and has paid down 23% since Moody's last
full review. The loan is amortizing on a 30-year schedule
and matures in November 2013. Moody's LTV and stressed DSCR are
44% and 2.88X, respectively, compared to 54%
and 2.35% at full 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
Tiffany Putman
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 One and Affirms Four CMBS Classes of BSCMS 1999-WF2
