Approximately $293.7 Million of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes,
downgraded six classes and affirmed nine classes of First Union National
Bank - Bank of America, N.A. Commercial Mortgage
Trust, Commercial Mortgage Pass-Through Certificates,
Series 2001-C1 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Mar 30, 2001 Definitive Rating Assigned Aaa (sf)
Cl. A-2F, Affirmed at Aaa (sf); previously on
Mar 30, 2001 Assigned Aaa (sf)
Cl. IO-I, Affirmed at Aaa (sf); previously on
Mar 30, 2001 Definitive Rating Assigned Aaa (sf)
Cl. IO-II, Affirmed at Aaa (sf); previously on
Mar 30, 2001 Definitive Rating Assigned Aaa (sf)
Cl. IO-III, Affirmed at Aaa (sf); previously
on Mar 30, 2001 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Aug 2,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Jul 23,
2009 Confirmed at Aaa (sf)
Cl. D, Upgraded to Aaa (sf); previously on Jul 23,
2009 Confirmed at Aa1 (sf)
Cl. E, Upgraded to Aaa (sf); previously on Jul 23,
2009 Confirmed at Aa3 (sf)
Cl. F, Affirmed at A1 (sf); previously on Jul 23,
2009 Confirmed at A1 (sf)
Cl. G, Affirmed at Baa1 (sf); previously on Jul 23,
2009 Confirmed at Baa1 (sf)
Cl. H, Downgraded to B1 (sf); previously on Jul 23,
2009 Confirmed at Baa3 (sf)
Cl. J, Downgraded to Ca (sf); previously on Jul 23,
2009 Downgraded to Ba3 (sf)
Cl. L, Downgraded to C (sf); previously on Jul 23,
2009 Downgraded to Caa1 (sf)
Cl. M, Downgraded to C (sf); previously on Jul 23,
2009 Downgraded to Caa2 (sf)
Cl. N, Downgraded to C (sf); previously on Jul 23,
2009 Downgraded to Ca (sf)
Cl. O, Downgraded to C (sf); previously on Jul 23,
2009 Downgraded to Ca (sf)
RATINGS RATIONALE
The upgrades are due to increased credit subordination levels resulting
from paydowns and amortization. The pool has paid down 69%
since Moody's prior review. The downgrades are due to higher
expected losses resulting from realized and anticipated losses from specially
serviced and troubled loans, interest shortfalls and refinancing
risk. Thirty-four loans, representing 52% of
the pool, mature within the next six months. Eleven of these
loans, representing 21% of the pool, have a Moody's
stressed debt service ratio (DSCR) less than 1.0X.
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
12.3% of the current balance. At last review,
Moody's cumulative base expected loss was 5.6%.
Moody's stressed scenario loss is 19.6% 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 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 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 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 15
compared to 7 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also generally
employs the large loan/single borrower methodology. Moody's
did not employ its large loan methodology for reviewing this transaction
despite the low Herf Index. Moody's did not employ this methodology
in the review of this deal despite the low Herf Index due to a significant
increase in credit subordination since our last review. Due to
the high percentage of loans in special servicing, Moody's
analysis was largely based on a loss and recovery analysis. The
conduit component only represents 29% of the pool. Moody's
incorporated additional stresses in our cash flow analysis of the conduit
component to offset the decline in loan diversity.
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 July 23, 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
six months.
DEAL PERFORMANCE
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 76% to $310.1
million from $1.31 billion at securitization. The
Certificates are collateralized by 46 mortgage loans ranging in size from
less than 1% to 12% of the pool, with the top ten
non-defeased loans representing 40% of the pool.
Eleven loans, representing 37% of the pool, have defeased
and are collateralized by U.S. Government securities.
Since the November distribution date five loans (11% of the pool))
have paid off. Moody's has incorporated the increased subordination
due to paydowns in its analysis.
Twenty loans, representing 41% 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
performance.
Twenty loans have been liquidated from the pool, resulting in an
aggregate realized loss of $66.9 million (40% loss
severity on average). At last review the pool had experienced aggregate
realized losses of $30.2 million. Fifteen loans,
representing 22% of the pool, are currently in special servicing.
The largest specially serviced loan is the Mercer Yale Office Building
loan ($15.2 million, 4.9% of the pool),
which is secured by a 96,204 square foot office building located
in Seattle, Washington. The loan is in special servicing
due to maturity default but it's performing. The property
is 100% leased by the Bill & Melinda Foundation through June
2012. No losses are estimated at this time for this loan.
Moody's LTV and stressed DSCR are 95% and 1.19X,
respectively, compared to 99% and 1.15X at last review.
The remaining 14 specially serviced loans are secured by a mix of property
types. The master servicer has recognized appraisal reductions
totaling $6.1 million for four of the specially serviced
loans. Moody's has estimated an aggregate $22.1
million loss (42% expected loss on average) for the specially serviced
loans.
Moody's has assumed a high default probability for six poorly performing
loans representing 13% of the pool and has estimated an aggregate
$9.3 million loss (23% expected loss based on a 77%
probability default) from these troubled loans.
Based on the most recent remittance statement, Classes J through
Q have experienced cumulative interest shortfalls totaling $1.5
million. Moody's anticipates that the pool will continue to experience
interest shortfalls because of the high exposure to specially serviced
loans. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal entitlement reductions
(ASERs) and extraordinary trust expenses.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 99% and 70% of the pool, respectively,
excluding defeasance and non-performing specially serviced loans.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 95% compared to 78% at Moody's prior
review. Moody's net cash flow reflects a weighted average
haircut of 11% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
10.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.15X and 1.23X, respectively,
compared to 1.37X and 1.46X 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.
The top three performing conduit loans represent 20% of the pool
balance. The largest loan is the EmeryTech loan ($36.0
million -- 11.6%), which is secured by a 224,000
square foot office building located in Emeryville, California.
In February 2010 the loan was returned from special servicing after being
modified. The loan's maturity was extended to December 2015.
Currently, the loan is on the master servicer's watchlist due to
low DSCR. The property's recent performance has been impacted
by a decline in occupancy due to lease expirations and several early terminations
due to business failures. Leasing as of October 2010 has improved
to 92% due to a new lease with Clif Bar for 52% of the NRA.
Moody's analysis of this loan reflects a stabilized occupancy.
Moody's LTV and stressed DSCR are 129% and 0.88X,
respectively, compared to 194% and 0.59X at last review.
The second largest loan is the Palisades Apartments Loan ($13.4
million -- 4.3% of the pool), which is secured
by a 281-unit multifamily property located in Las Vegas,
Nevada. The loan is on the master servicer watchlist due to maturity
default and low DSCR. The loan matured on September 1, 2010.
The property's performance has declined significantly since last
review due to the softness in the Las Vegas multifamily market.
Moody's considers this loan to be a high default risk and has identified
it as a troubled loan. Moody's LTV and stressed DSCR are 137%
and 0.75X, respectively, compared to 87% and
1.12X at last review.
The third largest loan is the Tripp Industrial Loan ($11.3
million -- 3.6% of the pool), which is secured
by nine warehouse buildings ( 837,000 square feet) located in Greenville,
North Carolina. The portfolio is 100% leased to Gander Mountain
through August 2011. The loan matures in January 2011 and the loan
is on the master servicer watchlist due to upcoming maturity. Moody's
considers this loan to be a high default risk and has identified it as
a troubled loan. Moody's LTV and stressed DSCR are 135%
and 0.84X, respectively, compared to 126% and
0.9X at last review.
REGULATORY DISCLOSURES
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 information.
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.
New York
Dariusz Surmacz
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Upgrades Two, Downgrades Six and Affirms Nine CMBS Classes of FUBOA 2001-C1
