Approximately $46.7 Million of Structured Securities Affected
New York, February 17, 2011 -- Moody's Investors Service (Moody's) upgraded the ratings of three classes
and affirmed seven classes of Solar Trust Commercial Mortgage Pass-Through
Certificates, Series 2001-1 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Aug 8, 2001 Definitive Rating Assigned Aaa (sf)
Cl. IO, Affirmed at Aaa (sf); previously on Aug 8,
2001 Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Apr 3,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Nov 8,
2007 Upgraded to Aaa (sf)
Cl. D, Upgraded to Aaa (sf); previously on Nov 8,
2007 Upgraded to A2 (sf)
Cl. E, Upgraded to A1 (sf); previously on Nov 8,
2007 Upgraded to Baa1 (sf)
Cl. F, Upgraded to Ba1 (sf); previously on Aug 8,
2001 Assigned Ba2 (sf)
Cl. G, Affirmed at Ba3 (sf); previously on Aug 8,
2001 Assigned Ba3 (sf)
Cl. H, Affirmed at B2 (sf); previously on Aug 8,
2001 Assigned B2 (sf)
Cl. J, Affirmed at B3 (sf); previously on Aug 8,
2001 Assigned B3 (sf)
The upgrades are due to increased credit 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, Moody's stressed 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 2.1%
of the current pooled balance. Moody's cumulative base expected
loss was 2.1% at last review. Moody's stressed scenario
loss is 6.3% of the current pooled 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
The principal methodologies used in this rating were "Moody's Approach
to Rating Canadian CMBS" published in May 2000, and "Moody's
Approach to Rating Large Loan/Single Borrower 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 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 11 at Moody's prior full 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 January 13, 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 reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had a neutral
impact on the rating.
As of the February 15, 2011 distribution date, the transaction's
aggregate certificate balance had decreased by 79% to $50.4
million from $241.2 million at securitization. The
Certificates are collateralized by 11 mortgage loans ranging in size from
2% to 29% of the pool. The pool does not contain
any defeased loans or loans with credit estimates. The entire pool
matures within the next six months.
Eight loans, representing 39% of the pool, are on the
master servicer's watchlist. All of the loans on the watchlist
mature within the next four months. 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
The pool has not experienced any losses since securitization. Currently
there are no specially serviced or delinquent loans.
Moody's was provided with full year 2009 operating results for 70%
of the pool. Moody's weighted average LTV is 57% compared
to 58% at last full review. Moody's net cash flow reflects
a weighted average haircut of 15% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.1%.
Moody's conduit and stressed DSCRs are 1.50X and 1.90X,
respectively, as compared to 1.54X and 1.90X at last
full review. Moody's conduit 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 conduit loans represent 60.7% of the pool
balance. The largest conduit loan is the Windsor Outlet Mall Loan
($14.7 million -- 29.1% of the pool),
which is secured by 145,820 square foot (SF) outlet mall located
in Windsor, Ontario. Occupancy at the property has declined
since last review, falling to 66% from 78%.
Performance is in-line with Moody's expectations.
Moody's previous analysis reflected a stressed cash flow because
of our concerns about the retail sector. The loan matures in July
2011. Moody's LTV and stressed DSCR are 68% and 1.50X,
respectively, compared to 68% and 1.51X at last review.
The second largest conduit loan is the Woodview Place Loan ($9.7
million -- 19.3% of the pool), which is secured
by a 147,851 SF retail property located in Burlington, Ontario.
As of January 2010, the property was 95% leased, essentially
the same as at last review. The largest tenants are Metro (44%
of the net rentable area (NRA); lease expiration February 2015) and
Jysk Linen 'n Furniture (15% of the NRA; lease expiration
March 2016). Performance has been stable since last review.
The loan matures in July 2011. Moody's LTV and stressed DSCR
are 59% and 1.74X, respectively, compared to
56% and 1.83X at last review.
The third largest conduit loan is the Young Tower Loan ($6.2
million -- 12.2% of the pool), which is secured
by a 138,124 SF office property located in Halifax, Nova Scotia.
Tenant concentration at the property is low, with no tenant accounting
for over 11% of the NRA. As of March 2010, the property
was 100% leased. Performance has been stable since last
review. The loan matures in April 2011. Moody's LTV
and stressed DSCR are 36% and 3.00X, respectively,
compared to 40% and 2.73X 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 Analytics
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 Seven CMBS Classes of STST 2001-1
250 Greenwich Street
New York, NY 10007