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Global Credit Research - 12 May 2010
Approximately $94.0 million of Structured Securities Affected
New York, May 12, 2010 -- Moody's Investors Service (Moody's) upgraded the rating of two classes,
affirmed three classes and downgraded two classes of Heller Financial
Commercial Mortgage Asset Corp., Mortgage Pass-Through
Certificates, Series 1999 PH-1. The upgrades are due
to increased credit subordination due to amortization and loan payoffs.
The pool balance has decreased by 67% since Moody's last review.
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced loans and
concerns about loans approaching maturity in an adverse environment.
Twelve loans, representing 57% of the pool, have or
will mature within the next seven months or have passed their respective
anticipated repayment dates (ARD). All of these loans are either
on the servicer's watchlist or are in special servicing.
The affirmations are due to key rating parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl
Index (Herf) remaining within acceptable ranges. Although loan
concentration, which is measured by Herf, has declined significantly
since securitization, it is similar to last review. The rating
action is the result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions.
As of the April 15, 2010 distribution date, the transaction's
aggregate Certificate balance has decreased by approximately 84%
to $160.4 million from $1.0 billion at securitization.
The Certificates are collateralized by 22 mortgage loans ranging in size
from less than 1% to 21% of the pool, with the top
ten non-defeased loans representing 85% of the pool.
The pool includes one loan with an investment grade underlying rating,
representing 6% of the pool. Four loans, representing
8% of the pool, have defeased and are collateralized by U.S.
Eight loans, representing 35% of the current pool balance,
are currently 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; formerly Commercial Mortgage
Securities Association) 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 performance.
Nine loans have been liquidated since securitization, resulting
in a $16.9 million loss (47% overall loss severity).
Six loans, representing 27% of the pool, are currently
in special servicing. The largest specially serviced loan is the
Somerset Grove II Loan ($33.2 million -- 20.7%
of the pool), which is secured by a 450,000 square foot office
building located in Somerset, New Jersey. At securitization
the property was 100% leased to AT&T Corp. (AT&T).
AT&T vacated in 2008 but continued to pay rent until its April 2009
lease expiration. The loan was transferred to special servicing
in January 2009 for imminent default and matured in May 2009. The
loan is currently real estate owned (REO).
The remaining five specially serviced loans are secured by multifamily
and manufactured housing properties. Moody's has estimated a $26.5
million aggregate loss for the specially serviced loans (61% expected
loss on average).
Moody's has assumed a high default probability for four loans,
representing approximately 17% of the pool. These loans
mature within the next 12 months and have a Moody's stressed DSCR
less than 1.0X or have significant performance problems.
Moody's has estimated a $7.9 million aggregate loss
on these loans (29% weighted average expected loss based on an
overall 63% default probability).
Moody's was provided with partial and year-end 2009 and full-year
2008 operating statements for 65% and 89%, respectively,
of the pool. Moody's weighted average LTV for the conduit pool,
excluding specially serviced and troubled loans, is 87% compared
to 89% at Moody's prior review.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.13X and 1.40X, respectively,
compared to 1.14X and 1.43X 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
the risk of multiple-notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf score
of 8, essentially the same as last review.
The loan with an underlying rating is the Station Plaza Office Complex
Loan ($10.0 million - 5.3% of the pool),
which is secured by a 320,500 square foot office building located
in Trenton, New Jersey. The property has been 100%
leased since securitization, with 87% of the space leased
to several New Jersey State agencies through October 2017. The
loan, which matures in August 2013, fully amortizes over its
15-year term and has amortized by approximately 19% since
last review. Moody's current underlying rating and stressed DSCR
are Aaa and 3.84X, respectively, compared to Aaa and
3.07X at last review.
The top three conduit loans represent 36% of the pool. The
largest conduit loan is the Barefoot Landing Loan ($29.8
million -- 18.6% of the pool), which is secured
by a 244,000 square foot entertainment/retail center located in
Myrtle Beach, South Carolina. The property was 95%
leased as of December 2009 compared to 100% at last review.
The property's financial performance declined since last review
due to lower rental revenues and increased expenses. The decline
in performance has been partially offset by principal amortization.
The loan has amortized 4% since last review. Moody's
LTV and stressed DSCR are 95% and 1.25X, respectively,
compared to 91% and 1.31X at last review.
The second largest conduit loan is the Springfield -- Prescott &
IDOT Loan ($17.5 million -- 10.9%),
which is secured by a 248,500 square foot office complex located
in Springfield, Illinois. The complex was 100% leased
as of April 2010, the same as last review. The largest tenant
is the Illinois Department of Public Aid (73% of net rentable area
(NRA); lease expiration 6/2014). The loan is on the master
servicer's watchlist because it passed its January 2009 ARD.
Moody's LTV and stressed DSCR are 97% and 1.31X,
respectively, compared to 98% and 1.27X at last review.
The third largest conduit loan is the Springfield -- Bressmer-Mendenhall
Loan ($10.0 million -- 6.2% of the pool),
which is secured by a 157,620 square foot office complex located
in Springfield, Illinois. The complex currently 100%
vacant after formerly being 100% leased to two state agencies.
Due to the vacancy and the soft Springfield office market, Moody's
is projecting a high probability of default on the loan. The loan
is on the master servicer's watchlist. Moody's LTV
and stressed DSCR are 200% and 0.59X, respectively,
compared to 93% and 1.26X at last review.
Moody's rating action is as follows:
-Class X, Notional, affirmed at Aaa; previously
assigned at Aaa on 5/27/1999
-Class D, $3,104,816, affirmed at
Aaa; previously upgraded to Aaa from Aa2 on 8/2/2006
-Class E, $12,622,000, affirmed
at Aaa; previously upgraded to Aaa from Aa2 on 10/10/2006
-Class F, $37,865,000, upgraded
to Aa1 from Aa3; previously upgraded to Aa3 from A1 on 5/21/2009
-Class G, $17,670,000, upgraded
to Aa3 from A2; previously upgraded to A2 from A3 on 5/21/2009
-Class L, $15,146,000, downgraded
to C from Ca; previously downgraded to Ca from B3 on 5/21/2009
-Class M, $7,573,000, downgraded
to C from Ca; previously downgraded to Ca from Caa2 on 5/21/2009
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 May 21, 2009.
The principal methodologies used in rating and monitoring this transaction
are "CMBS: Moody's Approach to Rating Fusion Transactions"
published on April 19, 2005 and "CMBS: Moody's
Approach to Rating Large Loan/Single Borrower Transactions" published
on July 7, 2000. Both methodologies are available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website. In
addition, 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.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Upgrades Two, Affirms Three and Downgrades Two CMBS Classes of HFCMC 1999-PH-1
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
No Related Data.
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