Approximately $471.6 Million of Structured Securities Affected
New York, December 02, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes,
affirmed eight classes and downgraded four classes of Bear Stearns Commercial
Mortgage Securities Trust 2001-TOP4, Commercial Mortgage
Pass-Through Certificates, Series 2001-TOP4 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Nov 8, 2001 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Nov 8, 2001 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Nov 8, 2001 Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Aug 16,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Sep 25,
2008 Upgraded to Aaa (sf)
Cl. D, Upgraded to Aa1 (sf); previously on Sep 25,
2008 Upgraded to Aa2 (sf)
Cl. E, Upgraded to A2 (sf); previously on Sep 25,
2008 Upgraded to A3 (sf)
Cl. F, Affirmed at Baa3 (sf); previously on Nov 8,
2001 Definitive Rating Assigned Baa3 (sf)
Cl. G, Affirmed at Ba1 (sf); previously on Nov 8,
2001 Definitive Rating Assigned Ba1 (sf)
Cl. H, Affirmed at Ba2 (sf); previously on Nov 8,
2001 Definitive Rating Assigned Ba2 (sf)
Cl. J, Downgraded to B3 (sf); previously on Nov 8,
2001 Definitive Rating Assigned Ba3 (sf)
Cl. K, Downgraded to Caa3 (sf); previously on Nov 8,
2001 Definitive Rating Assigned B1 (sf)
Cl. L, Downgraded to C (sf); previously on Jun 15,
2005 Downgraded to B3 (sf)
Cl. M, Downgraded to C (sf); previously on Jun 15,
2005 Downgraded to Caa1 (sf)
The upgrades are due to the significant increase in subordination due
to loan payoffs and amortization and stable overall performance.
The pool has paid down by 25% since last review. In addition,
the pool benefits from 19% defeasance.
The downgrades are due to higher expected losses for the pool resulting
from anticipated losses from specially serviced and troubled loans.
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 3.1%
of the current balance. At last review, Moody's cumulative
base expected loss was 1.5%. Moody's stressed scenario
loss is 4.7% 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 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
The principal methodology used in these ratings 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 September 26, 2007.
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.
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 47% to $474.6
million from $902.5 million at securitization. The
Certificates are collateralized by 115 mortgage loans ranging in size
from less than 1% to 8% of the pool, with the top
ten loans representing 33% of the pool. Twenty-four
loans, representing 19% of the pool, have defeased
and are collateralized with U.S. Government securities,
compared to 15% at last review. The pool includes two loans
with investment grade credit estimates, representing 11%
off the pool.
Twenty-four loans, representing 17% 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
Four loans have been liquidated from the pool since securitization,
resulting in an aggregate $5.99 million loss (50%
loss severity on average). The pool had not realized any losses
at last review. Two loans, representing 1.4%
of the pool, are currently in special servicing. The two
specially serviced loans are secured by office properties. The
master servicer has recognized an aggregate $4.7 million
appraisal reduction for the specially serviced loans. Moody's has
estimated an aggregate $4.97 million loss (76% expected
loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for seven poorly performing
loans representing 6.3% of the pool and has estimated an
aggregate $6.0 million loss (20% expected loss based
on a 50% probability of default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 95%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 66% compared
to 73% at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 12.1% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.7%.
Moody's actual and stressed DSCRs for the performing conduit loans are
1.53X and 1.78X, respectively, compared to 1.42X
and 1.50X 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 38
compared to 60 at Moody's prior review.
The largest loan with a credit estimate is the Morris Corporate Center
IV Loan ($37.2 million -- 7.8%),
which is secured by a 340,000 square foot (SF) Class A office complex
located in Parsippany, New Jersey. The property was 91%
leased as of July 2010. The loan sponsor is Lexington Corporate
Properties Trust, a publicly traded REIT, and the New York
Common Retirement Fund. Moody's current credit estimate and stressed
DSCR are Baa3 and 1.55X, respectively, compared to
Baa3 and 1.49X at the prior review.
The second loan with a credit estimate is the Tyson's Square Loan ($12.6
million -- 2.7%), which is secured by a 167,000
SF retail power center located in Tyson's Corner, Virginia.
The property was 83% occupied as of June 2010 compared to 100%
at last review. Major tenants include Marshalls and the Sports
Authority. The loan has benefited from 31% amortization
since securitization. Moody's current credit estimate and stressed
DSCR are Aa2 and 2.05X, respectively, compared to Aa2
and 2.01X at the prior review.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the Bridgewater Promenade Loan ($27.8
million -- 5.9% of the pool), which is secured
by a 234,000 SF power center located in Bridgewater, New Jersey.
The property has maintained 100% occupancy since securitization.
Major tenants include Bed Bath & Beyond, Babies"R"Us and Marshalls.
Moody's LTV and stressed DSCR are 80% and 1.29X, respectively,
compared to 88% and 1.16X at last review.
The second largest loan is Metaldyne Portfolio Loan ($14.9
million -- 3.1% of the pool), which is secured
by five industrial buildings totaling 534,000 SF. The properties
are located in Ohio (2), Illinois, Georgia and Michigan.
Originally, all of the properties were 100% leased to Metaldyne
Machining and Assembly Company, Inc. through 2021.
Metaldyne filed for bankruptcy in May 2009 and has since vacated all of
the buildings. As of June 2010, occupancy for the portfolio
was 63%. The loan is on the master servicer's watchlist
for low occupancy. Moody's LTV and stressed DSCR are 95%
and 1.13X, respectively, compared to 73% and
1.41X at last review.
The third largest loan is The Crossing at Stonegate Loan ($12.9
million -- 2.7% of the pool), which is secured
by a 109,000 SF grocery anchored retail center located in Parker,
Colorado. Occupancy as of June 2010 was 98% compared to
96% at last review. Moody's LTV and stressed DSCR are 85%
and 1.20X, respectively, compared to 87% and
1.19X 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 Two, Affirms Eight and Downgrades Four CMBS Classes of BSCMI 2001-TOP4
250 Greenwich Street
New York, NY 10007