Approximately $682.8 Million of Structured Securities Affected
New York, December 10, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of three classes,
affirmed 14 classes of Wachovia Bank Commercial Mortgage Trust Commercial
Mortgage Pass-Through Certificates, Series 2002-C2
as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Nov 12, 2002 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Dec 3, 2002 Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Dec 3, 2002 Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Dec 20,
2005 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Dec 20,
2005 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Feb 8,
2007 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Dec 20,
2007 Upgraded to Aaa (sf)
Cl. F, Upgraded to Aaa (sf); previously on Feb 7,
2008 Upgraded to Aa1 (sf)
Cl. G, Upgraded to Aa2 (sf); previously on Feb 7,
2008 Upgraded to Aa3 (sf)
Cl. H, Upgraded to A1 (sf); previously on Feb 7,
2008 Upgraded to A2 (sf)
Cl. J, Affirmed at Baa2 (sf); previously on Feb 7,
2008 Upgraded to Baa2 (sf)
Cl. K, Affirmed at Ba1 (sf); previously on Feb 8,
2007 Upgraded to Ba1 (sf)
Cl. L, Affirmed at Ba2 (sf); previously on Feb 8,
2007 Upgraded to Ba2 (sf)
Cl. M, Affirmed at B1 (sf); previously on Nov 12,
2002 Definitive Rating Assigned B1 (sf)
Cl. N, Affirmed at B2 (sf); previously on Nov 12,
2002 Definitive Rating Assigned B2 (sf)
Cl. O, Affirmed at B3 (sf); previously on Nov 12,
2002 Assigned B3 (sf)
Cl. IO-I, Affirmed at Aaa (sf); previously on
Nov 12, 2002 Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The upgrades are due to the significant increase in subordination due
to loan payoffs and amortization and overall stable pool performance.
The pool has paid down by 14% since Moody's last review.
In addition, the pool benefits from 29% defeasance.
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
2.6% of the current balance. At last review,
Moody's cumulative base expected loss was 1.6%.
Moody's stressed scenario loss is 5.2% 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 2010
and 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 "CMBS: Moody's
Approach to Rating Fusion Transactions", published in April
2005.
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 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 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 February 7, 2008.
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 November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 20% to $702.9
million from $875.1 million at securitization. The
Certificates are collateralized by 101 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten loans representing 35% of the pool. The pool contains
one loan with investment grade credit estimates that represent 3%
of the pool. Thirty-one loans, representing 29%
of the pool, have defeased and are collateralized with U.S.
Government securities, compared to 13% at last review.
Twenty-one loans, representing 19% 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.
There have been no losses since securitization. Three loans,
representing 2% of the pool, are currently in special servicing.
The master servicer has recognized an aggregate $6 million appraisal
reduction for the specially serviced loans. Moody's has estimated
an aggregate $6.2 million loss (38.2% expected
loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for four poorly performing
loans representing 3% of the pool and has estimated a $4.2
million aggregate loss (50% expected loss based on a 40%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 98%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 76% compared to 83%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 11% to the most recently available
net operating income (NOI). Moody's value reflects a weighted
average capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.52X and 1.41X, respectively,
compared to 1.26X and 1.19X 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.
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 31
compared to 52 at Moody's prior review.
The loan with a credit estimate is the Home Depot Expo Design Center Loan
($19.8 million - 2.8% of the pool),
which is secured by a 105,000 square foot (SF) retail building located
in Encinitas, California. The property is 100% vacant
as of April 2009, however Home Depot continues to pay rent (Moody's
senior unsecured rating Baa1) through January 2028. The collateral
is part of a larger 530,000 SF power center. Moody's current
credit estimate and stressed DSCR are Baa1 and 1.16X, respectively,
compared to Aa3 and 1.11X at last review.
The top three performing conduit loans represent 16% of the pool
balance. The largest loan is The Crossing at Smithfield Loan ($45.0
million -- 6.4% of the pool), which is secured
by a 588,000 SF anchored retail center in Smithfield, Rhode
Island. The property was 100% leased as of December 31,
2009 compared to 98% at last review. The three largest tenants
are Target (Moody's senior unsecured rating A2, 21%
of the NRA, lease expiration in 2027), Kohls (Moody's
senior unsecured rating Baa1, 15% of the NRA, lease
expiration in 2023), and Staples (Moody's senior unsecured
rating Baa2, 4% of the NRA, lease expiration in 2017).
Moody's LTV and stressed DSCR are 88% and 1.17X,
respectively, essentially the same as at last review.
The second largest loan is The Promenade at Town Center Loan ($33.9
million -- 4.8%), which is secured by a 181,723
SF grocery anchored community center in Valencia, California.
The property was 97% leased as of December 2009, compared
to 100% at last review. The three largest tenants are The
Vons Companies (30% of the NRA, lease expiration in 2017),
Homegoods Store (14% of the NRA, lease expiration in 2012),
and World of Jeans and Tops (6% of the NRA, lease expiration
in 2012). Moody's LTV and stressed DSCR are 82% and
1.22X, respectively, compared to 93% and 1.08X
at last review.
The third largest loan is the Kentlands Marketplace Loan ($31.4
million -- 4.5%), which is secured by a 252,000
SF anchored shopping center in Gaithersburg, Maryland. The
property was 92% leased as of December 2009, compared to
98% at last review. The top three largest tenants are Whole
Foods (14% of the NRA, lease expiration in 2021); Michael's
(9% of the NRA, lease expiration in 2014) and Bally Total
Fitness (9% of the net rentable area, lease expiration in
2014). Moody's LTV and stressed DSCR are 62% and 1.62X,
respectively, compared to 74% and 1.37X 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 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
Keith Banhazl
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Michael M. Gerdes
Senior Vice President
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 Three, Affirms 14 CMBS Classes of WBCMT 2002-C2
