Approximately $118.1 Million of Structured Securities Affected
New York, January 28, 2011 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes
and affirmed six classes of GMAC Commercial Mortgage Securities,
Inc., Commercial Mortgage Pass-Through Certificates,
Series 1999-C2 as follows:
Cl. X, Affirmed at Aaa (sf); previously on Jul 6,
1999 Definitive Rating Assigned Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Apr 15,
2009 Upgraded to Aaa (sf)
Cl. F, Upgraded to Aaa (sf); previously on Apr 15,
2009 Upgraded to Aa2 (sf)
Cl. G, Upgraded to Aa3 (sf); previously on Apr 15,
2009 Upgraded to A2 (sf)
Cl. H, Affirmed at Ba2 (sf); previously on Jul 6,
1999 Definitive Rating Assigned Ba2 (sf)
Cl. J, Affirmed at B1 (sf); previously on Jul 6,
2005 Downgraded to B1 (sf)
Cl. K, Affirmed at C (sf); previously on Apr 15,
2009 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Mar 30,
2007 Downgraded to C (sf)
RATINGS RATIONALE
The upgrades are due to increased credit subordination levels resulting
from paydowns and amortization and overall stable pool performance.
The pool has paid down 54% since Moody's prior review.
Moody's affirmed six classes because the current credit enhancement
levels for the affirmed classes are sufficient to maintain their current
ratings based on our current base expected loss.
Moody's rating action reflects a cumulative base expected loss of
6.5% of the current balance. At last review,
Moody's cumulative base expected loss was 6.6% Moody's
stressed scenario loss is 12.3% 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 at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Due to the high level of credit subordination, it is unlikely that
investment grade classes would be downgraded even if losses are higher
than Moody's expected base.
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 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 methodologies used in this rating were "CMBS: Moody's
Approach to Rating Fusion Transactions" published in April 2005,
"CMBS: Moody's Approach to Rating Large Loan/Single Borrower Transactions"
published in July 2000, and "CMBS: Moody's Approach to Rating
Credit Tenant Lease (CTL) Backed Transactions" published in October 1998.
All of these methodologies are available on Moody's website at www.moodys.com.
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 6 compared
to 16 at Moody's prior review.
In cases where the Herf falls below 20, Moody's employs also
the large loan/single borrower methodology. This methodology uses
the excel-based Large Loan Model v 8.0. 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.
For deals that include a pool of credit tenant loans, Moody's
currently uses a Gaussian copula model, incorporated in its public
CDO rating model CDOROMv2.6 to generate a portfolio loss distribution
to derive credit enhancement levels for CTL component. Under Moody's
CTL approach, the rating of a transaction's certificates is
primarily based on the senior unsecured debt rating (or the corporate
family rating) of the tenant, usually an investment grade rated
company, leasing the real estate collateral supporting the bonds.
This tenant's credit rating is the key factor in determining the
probability of default on the underlying lease. The lease generally
is "bondable", which means it is an absolute net lease,
yielding fixed rent paid to the trust through a lock-box,
sufficient under all circumstances to pay in full all interest and principal
of the loan. The leased property should be owned by a bankruptcy-remote,
special purpose borrower, which grants a first lien mortgage and
assignment of rents to the securitization trust. The dark value
of the collateral, which assumes the property is vacant or "dark",
is then examined to determine a recovery rate upon a loan's default.
Moody's also considers the overall structure and legal integrity
of the 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 April 15, 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 January 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 88% to $118.1
million from $974.5 million at securitization. The
Certificates are collateralized by 20 mortgage loans ranging in size from
less than 1% to 31% of the pool, with the top ten
non-defeased loans representing 88% of the pool.
Seven loans, representing 70% of the pool, are secured
by credit tenant leases (CTLs). Six loans, representing 8%
of the pool, have defeased and are secured by U.S.
Government securities. At last review defeasance represented 21%
of the pool balance.
Four loans, representing 11% 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.
Thirteen loans have been liquidated from the pool, resulting in
an aggregate realized loss of $20.1 million (16%
loss severity on average). Due to realized losses, classes
M and N have been eliminated entirely and class L has experienced a 75%
principal loss. At Moody's prior review the pool had experienced
an aggregate $19.5 million realized loss.
One loan, representing 3% of the pool, is currently
in special servicing. The loan is secured by a 147-unit
multifamily property located in Balch Springs, Texas. The
loan was transferred to the special servicer in January 2009 and is now
real estate owned (REO). Moody's has estimated a $1.9
million loss (60% expected loss) for this specially serviced loan.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 97% and 90% of the conduit pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 59% compared to 98% at Moody's prior
review. Moody's net cash flow reflects a weighted average
haircut of 15% 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 1.36X and 2.06X, respectively,
compared to 1.15X and 1.33X 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 conduit loans represent 15% of the outstanding pool
balance. The largest loan is the Briarcliff Summit Apartments Loan
($7.1 million - 6.0%), which
is secured by a 201-unit apartment complex located in Atlanta,
Georgia. As of September 2009 the property was 90% leased
and had a reported DSCR of 0.86X. The loan matures in May
2011. Moody's considers this loan to be a high default risk
because of poor performance and approaching maturity and has identified
it as a troubled loan. Moody's LTV and stressed DSCR are 137%
and 0.79X, respectively, compared to 143% and
0.76X at last review.
The second largest loan is the Bal Seal Engineering Loan ($6.3
million -- 5.3%), which is secured by a 125,000
square foot industrial property located in Foothill Ranch, California.
The property is 100% leased to Bal Seal Engineering Company through
January 2019. Performance has been stable. Moody's LTV and
stressed DSCR are 47% and 2.29X, respectively,
compared to 55% and 1.96X at last review.
The third largest loan is the Anchorage Business Park Loan ($4.6
million -- 3.9%), which is secured by a 190,000
square feet retail center located in anchorage, Alaska. The
property was 98% leased as of June 2010 compared to 97%
at last review. Performance has improved since lat review due to
higher revenues. Moody's LTV and stressed DSCR are 40% and
2.66X, respectively, compared to 47% and 2.25X
at last review.
The CTL component includes seven loans ($82.8 million --
70.1%) secured by properties leased to six tenants under
bondable leases. The largest exposures are Ingram Micro Inc.
(Moody's senior unsecured rating Baa3, stable outlook; 63%
of the CTL component), CarMax (19% of the CTL component),
and Costco Wholesale Corporation (Moody's senior unsecured rating A2;
stable outlook; 13% of the CTL component).
Credits representing approximately 81% of the CTL exposure are
publicly rated by Moody's. The bottom-dollar weighted average
rating factor (WARF) for the CTL component has improved to 1,247
compared to 1,439 at last review. WARF is a measure of the
overall quality of a pool of diverse credits. The bottom-dollar
WARF is a measure of the default probability within the pool.
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 and Affirms Six CMBS Classes of GMAC 1999-C2
