Approximately $675.6 Million of Structured Securities Affected
New York, November 18, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes,
affirmed nine classes and downgraded three classes of Morgan Stanley Dean
Witter Capital I Trust 2002-TOP7, Commercial Mortgage Pass-Through
Certificates, Series 2002-TOP 7 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Jun 18, 2002 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Jun 18, 2002 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Sep 19,
2005 Upgraded to Aaa (sf)
Cl. C, Upgraded to Aaa (sf); previously on Feb 2,
2007 Upgraded to Aa1 (sf)
Cl. D, Upgraded to Aa2 (sf); previously on Feb 2,
2007 Upgraded to Aa3 (sf)
Cl. E, Affirmed at A1 (sf); previously on Feb 2,
2007 Upgraded to A1 (sf)
Cl. F, Affirmed at Baa1 (sf); previously on Feb 2,
2007 Upgraded to Baa1 (sf)
Cl. G, Affirmed at Baa3 (sf); previously on Jun 18,
2002 Definitive Rating Assigned Baa3 (sf)
Cl. H, Affirmed at Ba2 (sf); previously on Oct 1,
2009 Downgraded to Ba2 (sf)
Cl. J, Downgraded to B3 (sf); previously on Oct 1,
2009 Downgraded to B1 (sf)
Cl. K, Downgraded to Caa2 (sf); previously on Oct 1,
2009 Downgraded to B3 (sf)
Cl. L, Downgraded to Ca (sf); previously on Oct 1,
2009 Downgraded to Caa2 (sf)
Cl. M, Affirmed at C (sf); previously on Oct 1,
2009 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Oct 1,
2009 Downgraded to C (sf)
The upgrades are due to increased subordination due to loan payoffs and
amortization and overall stable pool performance. The pool has
paid down approximately 30% since securitization and 7%
since last review.
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.
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
Moody's rating action reflects a cumulative base expected loss of
2.5% of the current balance compared to 2.8%
at Moody's prior review. 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 unemployment levels.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating U.S. Fusion 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 credit estimate 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 credit estimate 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 October 1, 2009. 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 30% to $675.6
million from $969.4 million at securitization. The
Certificates are collateralized by 126 mortgage loans ranging in size
from less than 1% to 9% of the pool, with the top
ten loans representing 32% of the pool. Twenty-four
loans, representing 22% of the pool, have defeased
and are collateralized by U.S. Government securities.
The pool contains two loans, representing 13% of the pool,
with investment-grade credit estimates.
Twenty-three loans, representing 16% 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 since securitization,
resulting in an aggregate $11.1 million loss (24%
loss severity on average). Currently, there are four loans,
representing 1% of the pool, in special servicing.
Moody's has estimated an aggregate $4.56 million loss
(50% expected loss on average) for the specially serviced loans.
Moody's has also assumed a high default probability for six poorly
performing loans representing 2% of the pool. Moody's
has estimated a $4.43 million loss (38% expected
loss based on a 75% probability default) from the troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 90% and 57% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 66% compared to 67% at Moody's prior
review. Moody's net cash flow reflects a weighted average
haircut of 12.4% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.6%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.66X and 1.77X, respectively,
compared to 1.70X and 1.76X 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 45
compared to 48 at last review.
The largest loan with a credit estimate is the Woodfield Mall Loan ($58.3
million -- 8.6% of the pool), which
represents a pari passu interest in a $230.7 million first
mortgage loan secured by the borrower's interest in the Woodfield Mall.
The property is also encumbered by a B-Note which is held outside
the trust. The super-regional mall contains 2.2 million
square feet of gross leasable area of which approximately 1.1 million
square feet serves as security for the loan. The center is located
25 miles northwest of downtown Chicago, in Schaumburg, Illinois.
Anchor stores include Nordstrom, Macy's, Lord &Taylor,
J.C. Penney and Sears. As of March 2010, the
in-line occupancy was 89% compared to 91% at last
review. Performance has been stable since last review and the loan
benefits from amortization. The borrower is a joint venture between
the California Public Employees' Retirement System and General Motors
Pension Trust. Moody's current underlying rating and stressed DSCR
are Aaa and 1.93X, respectively, compared to Aaa and
1.82X at last review.
The second loan with a credit estimate is the Route 9 Plaza Loan ($15.5
million -- 2.3% of the pool), which
is secured by a 265,000 square foot retail center located eight
miles southeast of New Brunswick in Old Bridge, New Jersey.
As of June 2010, the property was 100% leased, essentially
the same as at last review. The center is anchored by Wal-Mart
(51% of the net rentable area (NRA); lease expiration 1/2022)
and Home Depot (45% of the NRA; lease expiration 6/2031).
Moody's current underlying rating and stressed DSCR are Baa3 and 1.44X,
respectively, compared to Baa3 and 1.51X at last review.
The top three performing conduit loans represent 10% of the pool.
The largest conduit loan is Plaza di Northridge ($26.1 million
-- 3.9% of the pool), which is secured
by a 159,000 square foot retail center located in Northridge,
California. As of June 2010, the property was 73%
leased compared to 75% at last review. The low occupancy
is largely attributable to the closing of Linen 'N Things, which
declared bankruptcy in 2008 and closed all its stores. Though the
tenant continues to remit rent payments, Moody's has stressed
the property's cash flow. Moody's LTV and stressed DSCR are
101% and 1.02X, respectively, compared to 96%
and 1.07X at last review.
The second largest conduit loan is Midtown Square Shopping Center ($25.1
million -- 3.7% of the pool), which
is secured by 193,000 square feet of a 557,000 square foot
retail center located in Troy, Michigan. The collateral is
shadow anchored by Target, Home Depot and Kohl's. As of October
2010, the property was 100% leased compared to 98%
at last review. Moody's LTV and stressed DSCR are 92% and
1.11X, respectively, compared to 98% and 1.05X
The third largest conduit loan is the 520-526 Route 17 Paramus
Loan ($17.9 million -- 2.6%
of the pool), which is secured by a 120,000 square foot retail
center located in Bergen County, New Jersey. The property
is 100% leased to Home Depot under a lease expiring in 2020.
Moody's LTV and stressed DSCR are 80% and 1.14X, respectively,
compared to 87% and 1.06X 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 purpose 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 Nine and Downgrades Three CMBS Classes of MSDWC 2002-TOP7
250 Greenwich Street
New York, NY 10007