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Rating Action:

Moody's Upgrades Three and Affirms One Class of LBUBS 2003-C3

Global Credit Research - 12 Jun 2014

Approximately $12.6 Million of Structured Securities Affected

New York, June 12, 2014 -- Moody's Investors Service has upgraded the ratings on three classes and affirmed the rating on one class in LB-UBS Commercial Mortgage Trust 2003-C3, Commercial Mortgage Pass-Through Certificates, Series 2000-C3 as follows :

Cl. P, Upgraded to Aaa (sf); previously on Jun 27, 2013 Upgraded to A1 (sf)

Cl. Q, Upgraded to A2 (sf); previously on Jun 27, 2013 Upgraded to B1 (sf)

Cl. S, Upgraded to B1 (sf); previously on Jun 27, 2013 Affirmed Caa2 (sf)

Cl. X-CL, Affirmed Caa2 (sf); previously on Jun 27, 2013 Downgraded to Caa2 (sf)

RATINGS RATIONALE

The ratings on the P&I classes were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization as well as increased defeasance. The deal has paid down 36% since Moody's last review. Defeasance represents 8% of the current balance compared to 0% at last review.

The rating on the IO class, Class X-CL, was affirmed based on the credit performance (or the weighted average rating factor or WARF) of its referenced classes.

Moody's rating action reflects a base expected loss of 1.8% of the current balance compared to 12.6% at Moody's last review. Moody's base expected loss plus realized losses is now 1.0% of the original pooled balance compared to 1.1% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan-level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on 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, Moody's merges the credit enhancement for loans with investment-grade credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the credit assessment level) for loans with similar credit assessments in the same transaction.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 6 compared to 10 at Moody's 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 8.7 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.

DEAL PERFORMANCE

As of the May 16, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 99% to $17.8 million from $1.3 billion at securitization. The Certificates are collateralized by 11 mortgage loans. Two loans, representing 8% of the pool, have defeased and are collateralized with U.S. Government securities.

One loan, constituting 29% of the pool, is on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

Ten loans have been liquidated from the pool, resulting in an aggregate realized loss of $13.2 million (for an average loss severity of 46%). There are currently no loans in special servicing.

Moody's received full year 2012 and full or partial year 2013 operating results for 100% of the pool. Moody's weighted average conduit LTV is 64% compared to 65% at Moody's last review. Moody's conduit component excludes defeased, specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 18% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.3%.

Moody's actual and stressed conduit DSCRs are 1.22X and 1.73X, respectively, compared to 1.23X and 1.68X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The top three conduit loans represent 58% of the pool. The largest loan is the Rancho La Costa Loan ($5.1 million -- 28.7% of the pool), which is secured by a 27,384 square foot (SF) retail property located in Carlsbad, California. The property was 100% leased as of March 2014. The largest tenant, CVS, leases 54% of NRA through June 2022. Property performance has been stable and the loan matures in November 2018. The loan is on the servicer's watchlist due to a deferred maintenance issue. Moody's LTV and stressed DSCR are 58% and 1.79X, respectively, compared to 60% and 1.73X at last review.

The second largest conduit loan is the Walgreens-Henderson Loan ($3.5 million -- 19.9% of the pool), which is secured by a 15,120 SF single tenant retail property located in Henderson, Nevada. The property is fully leased to Walgreen Co. (Moody's senior unsecured rating Baa1, stable outlook) through March 2061. Property performance has been stable and the loan matures in February 2015. Moody's LTV and stressed DSCR are 93% and 1.07X, respectively, compared to 95% and 1.05X at last review.

The third largest conduit loan is the Rite Aid -- Medina Loan ($1.7 million -- 9.8% of the pool), which is secured by a 11,180 SF single tenant retail property located in Medina, Ohio. The property is fully leased to Rite Aid Corporation (Moody's senior unsecured rating Caa1, stable outlook) through July 2021 which is coterminus with the loan maturity. The loan fully amortizes during the loan term and has amortized 41% since securitization. Moody's LTV and stressed DSCR are 62% and 1.61X, respectively, compared to 64% and 1.57X at last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dariusz Surmacz
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Keith Banhazl
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Upgrades Three and Affirms One Class of LBUBS 2003-C3
No Related Data.
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