Approximately $178.6 Million of Structured Securities Affected
New York, February 24, 2011 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes
and affirmed nine classes of Solar Trust Commercial Mortgage Pass-Through
Certificates, Series 2002-1 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Dec 11, 2002 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Dec 11, 2002 Definitive Rating Assigned Aaa (sf)
Cl. IO, Affirmed at Aaa (sf); previously on Dec 11,
2002 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed med at Aaa (sf); previously on Apr 6,
2006 Upgraded to Aaa (sf)
Cl. C, Upgraded to Aa2 (sf); previously on Apr 6,
2006 Upgraded to A1 (sf)
Cl. D, Upgraded to A3 (sf); previously on Apr 6,
2006 Upgraded to Baa1 (sf)
Cl. E, Affirmed at Baa2 (sf); previously on Apr 6,
2006 Upgraded to Baa2 (sf)
Cl. F, Affirmed at Ba2 (sf); previously on Dec 11,
2002 Definitive Rating Assigned Ba2 (sf)
Cl. G, Affirmed at B1 (sf); previously on Dec 16,
2009 Downgraded to B1 (sf)
Cl. H, Affirmed at Caa1 (sf); previously on Dec 16,
2009 Downgraded to Caa1 (sf)
Cl. J, Affirmed at Caa2 (sf); previously on Dec 16,
2009 Downgraded to Caa2 (sf).
The upgrades are due to overall improved pool performance and increased
credit subordination due to amortization.
The affirmations are due to key parameters, including Moody's
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
Moody's rating action reflects a cumulative base expected loss of
1.9% of the current balance. At last review,
Moody's cumulative base expected loss was 3.0%.
Moody's stressed scenario loss is 5.3% 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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011 The hotel and multifamily sectors are continuing to show
signs of recovery, while recovery in the office and retail sectors
will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodologies used in this rating were: "Moody's
Approach to Rating Canadian CMBS " published on May 26, 2000,
"Moody's Approach to Rating Large Loan/Single Borrower Transactions"
published in July 7, 2000 and "Moody's Approach to Rating
Fusion Transactions" published in April 19, 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 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 18
compared to 19 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs
the large loan/single borrower methodology. This methodology uses
the excel-based Large Loan Model v 8.0 and then reconciles
and weights the results from the two models in formulating a rating recommendation.
The large loan model derives credit enhancement levels based on an aggregation
of adjusted loan level proceeds derived from Moody's loan level
LTV ratios. Major adjustments to determining proceeds include leverage,
loan structure, property type, and sponsorship. These
aggregated proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and correlations.
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 December 16, 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 February 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 32% to $182.6
million from $266.6 million at securitization. The
Certificates are collateralized by 49 mortgage loans ranging in size from
less than 1% to 9% of the pool, with the top ten loans
representing 58% of the pool. The pool includes one loan
with an investment-grade credit estimate, representing 8.3%
of the pool.
Ten loans, representing 27% 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
The pool has not experienced any losses since securitization. There
is currently one loan in special servicing comprising 0.3%
of the pool. Moody's is not currently estimating a loss for
the specially serviced loan.
Moody's has assumed a high default probability for two poorly performing
loans representing 2.4% of the pool and has estimated an
aggregate $3.7 million loss (15% expected loss based
on a 50% probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 85%
of the pool. Excluding troubled loans, Moody's weighted
average LTV is 65% compared to 83% at Moody's prior
review. Moody's net cash flow reflects a weighted average
haircut of 12% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
Excluding troubled loans, Moody's actual and stressed DSCRs
are 1.64X and 1.92X, respectively, compared
to 1.83X and 2.00X 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 loan with a credit estimate is the Chateauguay Centre Loan ($15.1
million -- 8.3% of the pool), which is secured
by a 211,666 square foot (SF) retail center located in Chateauguay,
Quebec. The center is anchored by Super C (23% of the net
rentable area (NRA); lease expiration September 2013), a grocery
retailer. The loan is 50% recourse to the borrower and matures
in March 2012. Performance has been stable since last review.
Moody's current credit estimate and stressed DSCR are Aa3 and 2.07X,
respectively, compared to Aa3 and 2.14X at last review.
The top three performing conduit loans represent 24% of the pool
balance. The largest loan is the Hotel Novotel Loan ($16.0
million -- 8.8% of the pool), which is secured
by a 262 unit full service hotel located in Toronto, Ontario.
The property also contains 25,000 SF of office/retail space.
Property performance improved significantly in 2010, with RevPAR
and ADR increasing to $106 and $132 by September,
compared to $86 and $129 for calendar year 2009.
Moody's LTV and stressed DSCR are 74% and 1.69X, respectively,
compared to 100% and 1.25X at last review.
The second largest loan is the Langley Gate Shopping Centre Loan ($14.3
million -- 7.8% of the pool), which is secured
by a 151,802 SF retail center located in Langley, British
Columbia. Major tenants include Sears (23% of the NRA;
lease expiration March 2018), Home Sense (17% of the NRA;
lease expiration January 2013) and Chapters (16% of the NRA;
lease expiration February 2013). The property is 100% leased
and there are no lease expirations until November 2012. The loan
matures in March 2012. Performance has been stable. Moody's
LTV and stressed DSCR are 52% and 1.94X, respectively,
compared to 57% and 1.78X at last review.
The third largest loan is the La Porte de Gatineau Loan ($12.5
million -- 6.8% of the pool), which is secured
by a 154,977 SF retail property located in Gatineau, Quebec.
The property was 94% leased as of August 2010, a slight decline
from 97% at last review. The loan is 100% recourse
to the borrower and has a 25 year amortization schedule. Although
performance has been stable, Moody's analysis incorporates
a stress cash flow to reflect potential income volatility as leases for
tenants leasing 70% of the NRA expire within the next 18 months.
The scheduled maturity date is August 2012. Moody's LTV and stressed
DSCR are 76% and 1.40X, respectively, compared
to 69% and 1.53X 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 and Affirms Nine CMBS Classes of STST 2002-1
250 Greenwich Street
New York, NY 10007