Approximately $66.2 Million of Structured Securities Affected
New York, December 02, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of three classes
and affirmed five classes of Morgan Stanley Capital I Inc.,
Commercial Mortgage Pass-Through Certificates, Series 1999-WF1
X, Affirmed at Aaa (sf); previously on Feb 24, 1999 Assigned
G, Affirmed at Aaa (sf); previously on Jul 9, 2008 Upgraded
to Aaa (sf)
H, Upgraded to Aaa (sf); previously on Jul 9, 2008 Upgraded
to Aa3 (sf)
J, Upgraded to Aa3 (sf); previously on Jul 9, 2008 Upgraded
to A3 (sf)
K, Upgraded to A3 (sf); previously on Jul 9, 2008 Upgraded
to Baa2 (sf)
L, Affirmed at B2 (sf); previously on Feb 24, 1999 Assigned
M, Affirmed at B3 (sf); previously on Feb 24, 1999 Assigned
N, Affirmed at Caa2 (sf); previously on Feb 24, 1999
Assigned Caa2 (sf)
The upgrades are due to the significant increase in subordination 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 and Moody's stressed debt service coverage
ratio (DSCR) remaining within acceptable ranges. The significant
decline in diversity of loan size, as measured by the Herfindahl
Index (Herf), has largely been offset by increased subordination.
Based on our current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their current
Moody's rating action reflects a cumulative base expected loss of
8.6% of the current balance. At last review,
Moody's cumulative base expected loss was 1.7%.
Moody's stressed scenario loss is 10.7% 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
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 methodologies used in these ratings were "CMBS:
Moody's Approach to Rating U.S. Conduit Transactions"
published in September 2000 and "CMBS: Moody's Approach
to Rating Large Loan/Single Borrower Transactions" published in
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 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 17
compared to 82 at Moody's prior 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 July 9, 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
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 93% to $66.2
million from $968.5 million at securitization. The
Certificates are collateralized by 37 mortgage loans ranging in size from
less than 1% to 13% of the pool, with the top ten
loans representing 65% of the pool. Four loans, representing
4% of the pool, have defeased and are collateralized with
U.S. Government securities.
Eight loans, representing 22% 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
Five loans have been liquidated from the pool, resulting in an aggregate
realized loss of $644,755 (8% loss severity overall).
Two loans, representing 11% of the pool, are currently
in special servicing. Moody's has estimated an aggregate
$4.4 million loss (60% expected loss on average)
for the specially serviced loans.
Moody's has assumed a high default probability for one poorly performing
loan representing less than 1% of the pool and has estimated a
$183,200 aggregate loss (37% expected loss based on
a 75% probability default) from this troubled loan.
Moody's was provided with full year 2009 operating results for 100%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 43% compared to 63%
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 9.8%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.77X and 2.92X, respectively,
compared to 1.73X and 1.91X 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 loans represent 27% of the pool balance.
The largest loan is the Ward Office/Retail Portfolio Loan ($8.5
million -- 12.8%), which is secured by three
office buildings (118,173 square feet) and two retail properties
(33,471 square feet) located approximately 25 miles northeast of
Baltimore in Bel Air, Maryland. The loan amortizes on a 20
year schedule and has amortized 18% since last review. Overall
occupancy was 96% as of June 2010 compared to 94% at last
review. Moody's LTV and stressed DSCR are 53% and
2.04X, respectively, compared to 56% and 1.92X
at last review.
The second largest loan is the Corporate Drive Sugarland TX Loan ($4.8
million -- 7.36%), which is secured by a 143,000
square foot industrial property located in Sugar Land, Texas.
The property is 100% leased to CGI Deserts, Inc. through
December 2013. The loan is amortizing on a 20 year schedule and
has amortized 17% since last review. Moody's LTV and
stressed DSCR are 50% and 2.09X, respectively,
compared to 58% and 1.81X at last review.
The third largest loan is the Silver Creek Shopping Center Loan ($4.7
million -- 7.2%), which is secured by 63,000
square feet retail property located in San Jose, California.
The property was 92% occupied as of September 2010. Moody's
LTV and stressed DSCR are 39% and 3.15X, respectively,
compared to 46% and 2.78X 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
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 Three and Affirms Five CMBS Classes of MSC 1999-WF1
250 Greenwich Street
New York, NY 10007