Approximately $298.3 Million of Structured Securities Affected
New York, February 03, 2011 -- Moody's Investors Service (Moody's) upgraded the ratings of six classes
and affirmed eight classes of Solar Trust, Commercial Mortgage Pass-Through
Certificates, Series 2003-CC1 as follows:
Cl. A-1 Certificate, Affirmed at Aaa (sf); previously
on May 27, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-2 Certificate, Affirmed at Aaa (sf); previously
on May 27, 2003 Definitive Rating Assigned Aaa (sf)
Cl. IO-1 Certificate, Affirmed at Aaa (sf); previously
on May 27, 2003 Definitive Rating Assigned Aaa (sf)
Cl. IO-2 Certificate, Affirmed at Aaa (sf); previously
on May 27, 2003 Definitive Rating Assigned Aaa (sf)
Cl. B Certificate, Affirmed at Aaa (sf); previously
on Jul 27, 2006 Upgraded to Aaa (sf)
Cl. C Certificate, Upgraded to Aaa (sf); previously
on Sep 25, 2008 Upgraded to Aa1 (sf)
Cl. D-1 Certificate, Upgraded to A1 (sf); previously
on Sep 25, 2008 Upgraded to Baa1 (sf)
Cl. D-2 Certificate, Upgraded to A1 (sf); previously
on Sep 25, 2008 Upgraded to Baa1 (sf)
Cl. E Certificate, Upgraded to Baa1 (sf); previously
on May 27, 2003 Definitive Rating Assigned Baa3 (sf)
Cl. F Certificate, Upgraded to Baa2 (sf); previously
on May 27, 2003 Definitive Rating Assigned Ba1 (sf)
Cl. G Certificate, Upgraded to Ba1 (sf); previously
on May 27, 2003 Definitive Rating Assigned Ba2 (sf)
Cl. H Certificate, Affirmed at Ba3 (sf); previously
on May 27, 2003 Definitive Rating Assigned Ba3 (sf)
Cl. J Certificate, Affirmed at B3 (sf); previously on
Apr 9, 2009 Downgraded to B3 (sf)
Cl. K Certificate, Affirmed at Caa1 (sf); previously
on Apr 9, 2009 Downgraded to Caa1 (sf)
RATINGS RATIONALE
The upgrades are due to increased credit subordination due to amortization
and loans payoffs and overall improved 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
their current ratings.
Moody's rating action reflects a cumulative base expected loss of
1.7% of the current balance. At last review,
Moody's cumulative base expected loss was 5.1%.
Moody's stressed scenario loss is 3.8% 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 stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2011;
we expect overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal deficits
and persistent unemployment levels.
The principal methodology used in this rating was "Moody's Approach
to Rating Canadian CMBS" published in May 2000.
In addition to methodologies and research available on moodys.com,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
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 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 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
credit estimates 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 credit estimate 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 26
compared to 28 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 April 9, 2009.
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 December 13, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by approximately 35%
to $305.3 million from $468.2 million at securitization.
The Certificates are collateralized by 58 loans ranging in size from less
than 1% to 7% of the pool, with the top 10 loans representing
49% of the pool. Six loans, representing 6%
of the pool, have defeased and are collateralized with Canadian
Government securities.
One loan, representing 1% of the pool, is on the master
servicer's watchlist. There have been no realized losses
since securitization and there are currently no delinquent or specially
serviced loans.
Moody's was provided with full year 2009 operating statements for 64%
of the pool. Moody's LTV ratio is 63% compared to 78%
at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 13% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 10.0%.
Moody's actual and stressed DSCRs are 2.17X and 2.32X,
respectively, compared to 1.45X and 1.54X 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 three largest loans represent 19% of the pool. The largest
loan is the Eglinton Square Loan ($21.9 million --
7.2%), which is secured by a 275,000 square
foot retail center located in the Greater Toronto area. The property
was 95% leased as of March 2010 compared to 91% at last
review. Moody's LTV and stressed DSCR are 63% and 1.68X,
respectively, compared to 80% and 1.33X at the last
review.
The second largest loan is the Kirkland Centre Loan ($21.6
million -- 7.1%), which is secured by
a 225,000 square foot retail center located in suburban Montreal.
The property was 98% leased as of February 2010 compared to 92%
at last review and 100% at securitization. Anchor tenants
include Winners and Business Depot, both of which are on long-term
leases. The loan is full recourse to the sponsor, RioCan
Real Investment Trust, Canada's largest real estate investment trust.
Moody's LTV and stressed DSCR are 66% and 1.47X, respectively,
compared to 67% and 1.45X at Moody's last review.
The third largest loan is the Matheson Boulevard Loan ($15.7
million -- 5.1%), which is secured by
a 187,000 square foot Class A suburban office building located in
Mississauga, Ontario. Performance has improved since last
review due to increased revenues and stable expenses. The property
has been 100% leased since securitization, however,
the lease for a tenant which occupied 24% of the premises expired
in December 2010. We have not yet received confirmation of whether
the tenant is still in occupancy but Moody's analysis reflects a
stressed cash flow to reflect the potential loss of income from this tenant.
Moody's LTV and stressed DSCR are 68% and 1.47X, respectively,
compared to 84% and 1.45X at 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 purpose 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
Amit Rustgi
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 Six and Affirms Eight CMBS Classes of STST 2003-CC1
