Approximately $20.4 Million of Structured Securities Affected
New York, March 24, 2011 -- Moody's Investors Service (Moody's) upgraded the rating of one class and
affirmed two classes of Commercial Mortgage Acceptance Corp.,
Commercial Mortgage Pass-Through Certificates, Series 1998-C1
Cl. X, Affirmed at Aaa (sf); previously on Jul 28,
1998 Assigned Aaa (sf)
Cl. M, Affirmed at C (sf); previously on May 25,
2006 Downgraded to C (sf)
Cl. L, Upgraded to Caa3 (sf); previously on May 20,
2010 Downgraded to Ca (sf)
The upgrade is due to overall improved pool performance. Additionally,
at last review, Moody's had estimated $11.2
million in potential losses from seven poorly performing loans.
Of those loans, two loans paid off, four loans remain in the
pool and one loan liquidated resulting in an actual loss of $292,363
- a difference of $10.9 million.
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 6.2%
of the current balance. At last review, Moody's cumulative
base expected loss was 11.7%. Moody's stressed scenario
loss is 9.1% 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 23,
compared to 25 at Moody's prior review.
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 May 20, 2010. Please
see the ratings tab on the issuer / entity page on moodys.com for
the last rating action and the ratings history.
As of the March 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 92% to $96.9
million from $1.2 billion at securitization. The
Certificates are collateralized by 44 mortgage loans ranging in size from
less than 1% to 11% of the pool, with the top ten
performing loans representing 50% of the pool.
Seven loans, representing 13% 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.
Fifteen loans have been liquidated from the pool since securitization,
resulting in an aggregate $12.3 million loss (29%
loss severity on average). One loan, representing 3%
of the pool, is currently in special servicing. The master
servicer has recognized a $1.9 million appraisal reduction
on the specially serviced loan. Moody's has estimated a $2.1
million loss (73% expected loss) for the specially serviced loan.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 95% and 74%, respectively, of the
pool's loans. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 55% compared to 64% at last
review. Moody's net cash flow reflects a weighted average haircut
of 14% 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 1.51X and 2.21X, respectively,
compared to 1.41X and 1.97X 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 performing conduit loans represent 24% of the pool
balance. The largest loan is Shrewsbury Plaza Loan ($10.7
million -- 11.1% of the pool), which is secured
by a 225,000 square foot (SF) retail center located in Shrewsbury,
New Jersey. The property was 84% leased as of December 2010.
Loan performance has improved since last review due to an increase in
base rent. Moody's LTV and stressed DSCR are 39% and 2.75X,
respectively, compared to 70% and 1.45X at last review.
The second largest loan is JP Center Loan ($8.5 million
-- 8.7% of the pool), which is secured by a 68,400
SF grocery anchored retail center located in Jamaica Plains, Massachusetts.
Performance has been stable. The property was 100% leased
as of December 2010. Moody's LTV and stressed DSCR are 75%
and 1.45X, respectively, compared to 78% and
1.38X at last review.
The third largest loan is Dorchester Manor Loan ($4.0 million
-- 4.2% of the pool), which is secured by a 200-unit
multifamily complex located in New Milford, New Jersey. The
property was 83% leased as of December 2009. Moody's LTV
and stressed DSCR are 32% and 3.19X, respectively,
compared to 33% and 3.08X 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 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 Two CMBS Classes of CMAC 1998-C1
250 Greenwich Street
New York, NY 10007