Approximately $70.17 Million of Structured Securities Affected
New York, June 09, 2011 -- Moody's Investors Service (Moody's) upgraded one and affirmed six classes
of Banc of America Commercial Mortgage Inc. Commercial Mortgage
Pass-Through Certificates, Series 2001-1 as follows:
Cl. X, Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. G, Upgraded to A3 (sf); previously on Sep 16,
2010 Downgraded to Baa2 (sf)
Cl. H, Affirmed at B2 (sf); previously on Sep 16,
2010 Downgraded to B2 (sf)
Cl. J, Affirmed at Caa3 (sf); previously on Sep 16,
2010 Downgraded to Caa3 (sf)
Cl. K, Affirmed at Ca (sf); previously on Sep 16,
2010 Downgraded to Ca (sf)
Cl. L, Affirmed at C (sf); previously on Sep 16,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Sep 16,
2010 Downgraded to C (sf)
The upgrade is due to an increase in subordination from payoffs and amortization.
The pool has paid down 93% since securitization and 86%
since last review.
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
29.5% of the current balance compared to 9.2%
at last review. The current cumulative base expected loss represents
a higher percentage of the pool than at last review due to significant
pay downs since last review, even though the dollar amount of expected
loss is less. The current cumulative base expected loss is $20.7
million compared to $46.5 million at last review.
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 primary methodology used in these ratings were "CMBS:
Moody's Approach to Rating U.S. Conduit Transactions"
published in September 2000.
Moody's also considered "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 (sf) 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 (sf) 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 (sf) and B2 (sf), 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 underlying rating 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 2 compared
to 25 at Moody's prior full 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 September 16, 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.
As of the May 16, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 93% to $70.17
million from $948.13 million at securitization. The
Certificates are collateralized by 12 mortgage loans ranging in size from
2% to 23% of the pool, with the top ten loans representing
96% of the pool.
One loan, representing 2.2% 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
Thirteen loans have been liquidated from the pool since securitization,
resulting in an aggregate $39.4 million loss (17%
loss severity on average). Currently nine loans, representing
78% of the pool, are in special servicing. The largest
specially serviced loan is the Talley Plaza Loan ($15.8
million -- 22.5% of the pool), which is secured
by a 223,400 square feet (SF) office building located in Phoenix,
Arizona. The loan transferred into special servicing in February
2011 due to maturity default. Strategic Financial Services (12.7%
of NRA) vacated the property at the end of 2010. As a result,
the property was 72% leased as of January 2011 compared to 79%
at last review. The borrower has requested an extension of the
maturity date. The second largest loan in special servicing is
the Waretech Industrial Park Loan ($13.9 million --
19.9% of the pool), which is secured by a 673,000
SF industrial property located in Grand Blanc, Michigan.
The loan transferred into special servicing in May 2009 due to imminent
default and the property was foreclosed on in July 2010. The property
was 80% leased as of December 2010 compared to 38% at last
review. The third largest loan in special servicing is the Willows
Corporate Center Loan ($9.4 million -- 13.4%
of the pool), which is secured by a 53,000 SF office complex
in Redmond, Washington. The loan transferred into special
servicing in October 2010 due to the borrower offering title through a
deed in lieu.
The master servicer has recognized an aggregate $14.1 million
appraisal reduction for four of the specially serviced loans. Moody's
has estimated an aggregate loss of $15.7 million (49%
expected loss on average) for six of the specially serviced loans.
Moody's has assumed a high default probability for one poorly performing
loan representing 17.7% of the pool and has estimated a
$1.9 million loss (15% expected loss based on a 50%
probability default) from this troubled loan.
Based on the most recent remittance statement, Classes J through
P have experienced cumulative interest shortfalls totaling $4.66
million. Moody's anticipates that the pool will continue
to experience interest shortfalls because of the high exposure to specially
serviced loans. Interest shortfalls are caused by special servicing
fees, including workout and liquidation fees, appraisal subordinate
entitlement reductions (ASERs) and extraordinary trust expenses.
Moody's was provided with full year 2009 and partial/full year 2010 operating
results for 93% and 49% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 109% compared to 72% at last full review.
Moody's net cash flow reflects a weighted average haircut of 29%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 10.2%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 0.95X and 1.22X, respectively,
compared to 1.68X and 1.64X 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 conduit loans represent 22% of the pool balance.
The largest loan is the Freeport Office Center IV Loan ($12.4
million -- 17.7% of the pool), which is secured
by 159,000 SF office complex located in Irving, Texas.
The loan had been in special servicing due to a maturity default but was
transferred back to the master servicer April 2011 after the loan was
extended to May 2012. The property had been 100% leased
to the Ford Motor Company but in May 2010 the renewed the leased for five
years for approximately 40% of the total leaseable area.
Moody's is concerned about the near-term refinance risk associated
with this loan and has recognized this as a troubled loan. Moody's
LTV and stressed DSCR are 142% and 0.69X, respectively,
same at last full 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 Analytics'
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.
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 One and Affirms Six CMBS Classes of BACM 2001-1
250 Greenwich Street
New York, NY 10007