Approximately $91.1 Million of Structured Securities Affected
New York, December 02, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes,
downgraded one class, and affirmed six classes of Bear Stearns Commercial
Mortgage Securities Inc., Commercial Mortgage Pass-Through
Certificates, Series 1999-C1 as follows:
X, Affirmed at Aaa (sf); previously on Feb 10, 1999 Assigned
B, Affirmed at Aaa (sf); previously on Feb 9, 2005 Upgraded
to Aaa (sf)
C, Affirmed at Aaa (sf); previously on Jul 12, 2006 Upgraded
to Aaa (sf)
D, Upgraded to Aaa (sf); previously on Mar 17, 2008 Upgraded
to Aa2 (sf)
E, Upgraded to Aa3 (sf); previously on Mar 17, 2008 Upgraded
to A1 (sf)
G, Affirmed at Ba3 (sf); previously on Feb 9, 2005 Downgraded
to Ba3 (sf)
H, Affirmed at B2 (sf); previously on Feb 9, 2005 Downgraded
to B2 (sf)
I, Downgraded to Ca (sf); previously on Mar 17, 2008
Downgraded to Caa3 (sf)
J, Affirmed at C (sf); previously on Feb 9, 2005 Downgraded
to C (sf)
The upgrades are due to overall improved pool performance and a significant
increase in subordination levels since Moody's last review.
The downgrade is due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans. The affirmations and 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
5.1% of the current balance. At last review,
Moody's cumulative base expected loss was 2.2%.
Moody's stressed scenario loss is 6.8% 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
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. Conduit Transactions " published
in September 2000.
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 pay down 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
underlying ratings 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 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 March 17, 2008. 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 ratings.
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 81% to $91.1
million from $478 million at securitization. The Certificates
are collateralized by 31 mortgage loans ranging in size from less than
1% to 8% of the pool, with the top ten loans representing
55% of the pool. Five loans have defeased, representing
11% of the pool, and are collateralized by U.S.
Government securities. There are no loans with credit estimates.
Four loans, representing 15% 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
Eleven loans have been liquidated from the pool, resulting in an
aggregate realized loss of $5.4 million (35% loss
severity overall). Two loans, representing 3% of the
pool, are currently in special servicing. The specially serviced
loans are represented by a retail center and mobile home community.
Moody's has estimated an aggregate $1.3 million loss
(45% expected loss on average) for these two specially serviced
Moody's has assumed a high default probability for two poorly performing
loans representing 11% of the pool and has estimated a $2
million loss (20% expected loss based on a 50% probability
default) from these troubled loans. Moody's rating action
recognizes potential uncertainty around the timing and magnitude of loss
from these troubled loans.
Moody's was provided with partial year 2009 operating results for
68% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 46% compared
to 66% at Moody's prior review. Moody's net
cash flow reflects a weighted average haircut of 11.3% to
the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.9%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 3.97X and 3.57X, respectively,
compared to 1.84X and 2.11X 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 18
compared to 23 at Moody's prior review.
The top three performing loans represent 21% of the pool balance.
The largest loan is the Hamilton Station Apartments Loan ($7.6
million -- 8.4% of the pool), which is secured
by a 284-unit apartment complex located in Columbus, Georgia.
Performance has been stable with the property 93% leased as of
June 2010 compared to 97% as of December 2009. Despite the
drop in occupancy, performance has improved since last review.
The loan has also benefitted from 7% amortization since last review.
Moody's LTV and stressed DSCR are 57% and 1.81X,
respectively, compared to 70% and 1.48X at last review.
The second largest loan is the Eden Center Loan ($6.2 million
-- 6.8% of the pool), which is secured by a 207,000
square foot retail center located in Falls Church, Virginia.
The property's financial performance has improved since last review
due to higher revenue achievement. The property was 100%
leased as of December 2009 compared to 90% at securitization.
The loan has amortized 19% since last review. Moody's
LTV and stressed DSCR are 15% and >4.0X, respectively,
compared to 19% and 3.92X at last review.
The third largest conduit loan is The Lakes Apartment Complex ($5.1
million -- 5.6% of the pool), which is secured
by a 172-unit apartment complex located in Columbus, Georgia.
The property was 94% leased as of June 2010 compared to 99%
as of December 2009. Despite the drop in occupancy, performance
has improved since last review. The loan has also benefitted from
7% amortization since last review. Moody's LTV and
stressed DSCR are 49% and 2.03X, respectively,
compared to 68% and 1.48X 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 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.
Vice President - Senior Analyst
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, Downgrades One and Affirms Six CMBS Classes of BSCMS 1999-C1
250 Greenwich Street
New York, NY 10007