Approximately $258.9 Million of Structured Securities Affected
New York, February 24, 2011 -- Moody's Investors Service (Moody's) upgraded the rating of three classes
and affirmed eight classes of LB-UBS, Commercial Mortgage
Trust, Commercial Mortgage Pass-Through Certificates,
Series 2001-C1 as follows:
Cl. X, Affirmed at Aaa (sf); previously on May 24,
2001 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
May 24, 2001 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Feb 11,
2010 Confirmed at Aaa (sf)
Cl. C, Upgraded to Aaa (sf); previously on Feb 11,
2010 Downgraded to Aa2 (sf)
Cl. D, Upgraded to Aa3 (sf); previously on Feb 11,
2010 Downgraded to A2 (sf)
Cl. E, Upgraded to A3 (sf); previously on Feb 11,
2010 Downgraded to Baa2 (sf)
Cl. F, Affirmed at B1 (sf); previously on Feb 11,
2010 Downgraded to B1 (sf)
Cl. G, Affirmed at Caa1 (sf); previously on Feb 11,
2010 Downgraded to Caa1 (sf)
Cl. H, Affirmed at Ca (sf); previously on Feb 11,
2010 Downgraded to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Feb 11,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Feb 11,
2010 Downgraded to C (sf)
The upgrades of Classes C, D and E are due to a significant increase
in subordination levels due to loan payoffs 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 their current ratings.
Moody's rating action reflects a cumulative base expected loss of
6.6% of the current balance. At last review,
Moody's cumulative base loss was 6.3%. Moody's
stressed scenario loss is 8.8% 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 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 methodologies used in this rating were "CMBS: Moody's
Approach to Rating Fusion Transactions" published in July 2000 and "CMBS:
Moody's Approach to Rating Large Loans/Single Borrower Transactions"
published in July 2000, both of which are available on Moody's
website at www.moodys.com.
In addition to methodologies and research, 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 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
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 6 compared
to 20 at last 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 February 11, 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 received and took into account one or
more third party due diligence report(s) on the underlying assets or financial
instruments in this transaction and the due diligence report(s) had a
neutral impact on the ratings.
As of the February 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 80% to $258.9
million from $1.3 billion at securitization. The
Certificates are collateralized by 29 mortgage loans ranging in size from
less than 1% to 26% of the pool, with the top ten
loans representing 48% of the pool. Five loans, representing
29% of the pool, have defeased and are collateralized by
U.S. Government securities. There are no loans in
the pool with an investment grade credit estimate. At last review
the New Park Mall Loan ($66.1 million - 25.5%
of the pool) had an investment grade credit estimate. However,
due to a decline in performance and increased leverage this loan is now
analyzed as part of the conduit pool.
Ten loans, representing 20% 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
Fifteen loans have been liquidated from the pool since securitization,
resulting in a $51.7 million loss (45% loss severity
on average). The pool has experienced an aggregate $25.6
million loss at last review. Realized losses have resulted in 100%
principal loss for Classes L through Q and a 47% loss to Class
K. There are presently 12 loans, representing 26%
of the pool, in special servicing. The largest specially
serviced loan is the Courtyard at Miami Lakes Loan ($19.3
million -- 7.5% of the pool), which is secured
by a 448-unit apartment complex built in 1974 and renovated in
2000 located in Miami Lakes, Florida. The loan was transferred
to special servicing November 2010 due to financial performance concerns
and looming loan maturity. The property was 83% leased as
of June 2010 versus 93% at securitization.
The second largest specially serviced loan is the Shadowood Office Park
Loan ($12.6 million -- 4.9% of the pool),
which is secured by a 197,452 square foot (SF) three-building
office complex located in Atlanta, Georgia. This loan was
transferred to special servicing in February 2010 due to imminent default
and is now real estate owned (REO). The master servicer recognized
a $3.2 million appraisal reduction in October 2010.
Property occupancy was 61% as of March 2010 compared to 68%
in December 2009 and 99% at securitization.
The third largest specially serviced loan is the Metroplex Tech Center
I Loan ($9.5 million -- 3.7% of the pool),
which is secured by a 106,000 SF office building located in Carrollton,
Texas. The loan was transferred to special servicing on December
2009 due to technical default. The property was 100% leased
as of September 2010, same as last review and at securitization.
The loan's anticipated repayment date (ARD) was February 15,
2011 and the loan will begin to hyper-amortize on a go forward
basis until refinanced.
The remaining nine specially serviced loans are secured by a mix of office,
retail and multi-family properties. Moody's estimates
an aggregate $14.3 million loss for nine of the specially
serviced loans (26% expected loss on average). The special
servicer has recognized appraisal reductions totaling $4.5
million for five specially serviced loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 69% and 66%, respectively, of the
pool's non-defeased loans. Excluding specially serviced
loans, Moody's weighted average LTV is 73% compared
to 81% at Moody's prior review. Moody's net
cash flow reflects a weighted average haircut of 11.0% to
the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.37%.
Excluding specially serviced loans, Moody's actual and stressed
DSCRs are 1.30X and 1.39X, respectively, compared
to 1.29X and 1.36X 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 loan that formerly had a credit estimate is the NewPark Mall Loan
($66.1 million -- 25.5% of the pool),
which is secured by the borrower's interest in a 1.2 million
SF enclosed regional shopping mall located in Newark, California.
The loan sponsor is an affiliate of General Growth Properties (GGP).
The loan had been in special servicing due to GGP's bankruptcy filing
but was transferred back to the master servicer in the fall of 2010 after
the maturity date was extended from June 2010 to August 2014 as part of
the bankruptcy court's reorganization plan. Anchor tenants
include Target, Macy's, Sears and JC Penney.
Mall occupancy was 96% as of September 2010 with inline mall tenant
occupancy at 61%. Financial performance has declined since
last review due to lower inline tenant occupancy and challenging regional
economic conditions. Moody's LTV and stressed DSCR are 71%
and 1.38X, respectively, compared to 54% and
1.76X at last review.
The top three performing conduit loans represent 14% of the pool
balance. The largest loan is the 215 Coles Street Loan ($21.2
million -- 8.2% of the pool), which is secured
by a 713,852 SF industrial property located in Jersey City,
New Jersey. Financial performance has been stable since last review.
The property was 100% leased as of January 2009, the same
as at securitization. This loan has an anticipated repayment date
(ARD) of March 11, 2011 and is on the master servicer's watchlist
due to refinancing uncertainty. The loan is current. Moody's
LTV and stressed DSCR are 74% and 1.22X, respectively,
compared to 82% and 1.33X at last review.
The second largest loan is the Super Stop and Shop Loan ($7.5
million -- 2.9% of the pool), which is secured
by a 65,706 SF retail center located in New Bedford, Massachusetts.
Financial performance has declined since last review due to higher operating
expenses, primarily real estate taxes. The center was 100%
net leased as September 2010 to Stop and Shop on a long-term lease
expiring in December 2015. The loan has an ARD of March 11,
2011 and is on the master servicer's watchlist due to refinancing
uncertainty. The loan is current. Moody's LTV and
stressed DSCR are 84% and 1.23X, respectively,
compared to 71% and 1.46X at last review.
The third largest loan is the Latrobe 30 Plaza Loan ($6.7
million -- 2.6% of the pool), which is secured
by a 270,110 SF retail center located in Latrobe, Pennsylvania.
Financial performance has declined since last review due to low occupancy.
The property was 72% leased as of March 2010 versus 68%
at last review. Major retail tenants include Supervalu, Tractor
Supply Company and Rite Aid. This loan has an ARD of March 11,
2011 and is on the master servicer's watchlist due to refinancing
uncertainty.The loan is current. Moody's LTV and stressed
DSCR are 68% and 1.5X, respectively, compared
to 67% and 1.54X 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's information and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer 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.
Vice President - Senior Analyst
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 Three and Affirms Eight CMBS Classes of LBUBS 2001-C2
250 Greenwich Street
New York, NY 10007