Approximately $71.0 Million of Structured Securities Affected
New York, March 02, 2011 -- Moody's Investors Service (Moody's) upgraded the rating of two classes
and affirmed two classes of GMAC Commercial Mortgage Securities,
Inc., Mortgage Pass-Through Certificates, Series
1997-C2 as follows:
Cl. X, Affirmed at Aaa (sf); previously on Dec 23,
1997 Assigned Aaa (sf)
Cl. F, Upgraded to A1 (sf); previously on Apr 11,
2008 Upgraded to A3 (sf)
Cl. G, Upgraded to B2 (sf); previously on Jul 31,
2003 Downgraded to B3 (sf)
Cl. H, Affirmed at C (sf); previously on Sep 14,
2005 Downgraded to C (sf)
The upgrades are due to an increase in subordination from paydowns and
amortization and improved pool performance. The affirmations are
due to key parameters, including Moody's loan to value (LTV)
ratio, and Moody's stressed debt service coverage ratio (DSCR)
remaining within acceptable ranges.
Moody's rating action reflects a cumulative base expected loss of
1.2% of the current balance. At last review,
Moody's cumulative base expected loss was 5.2%.
Moody's stressed scenario loss is 11.3% 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.
Due to the high level of credit subordination and defeasance, 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 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 "CMBS: Moody's
Approach to Rating U.S. Conduit Transactions" published
in September 2000, and "Moody's Approach to Rating Large Loan/Single
Borrower Transactions" published in July 2000.
In addition to methodologies and research, 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 and the CMBS Large Loan Model v 8.0. 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 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 five,
essentially the same as Moody's prior review.
In cases where the Herf falls below 20, Moody's employs 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.
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 11, 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 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 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 93% to $71.0
million from $1.07 billion at securitization. The
Certificates are collateralized by nine mortgage loans ranging in size
from 1% to 24% of the pool. Two loans representing
17% of the pool have defeased and are collateralized with U.S.
There are no loans on the master servicer's watchlist and currently
there are no specially serviced loans. Sixteen loans have been
liquidated from the pool since securitization, resulting in an aggregate
$57.5 million loss (26% loss severity on average).
Based on the most recent remittance statement, Classes H,
J and K have experienced cumulative interest shortfalls totaling $4.0
million. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate entitlement
reductions (ASERs), extraordinary trust expenses and non-advancing
by the master servicer based on a determination of non-recoverability.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 70% and 88% of the pool, respectively.
Moody's weighted average LTV is 74% compared to 85%
at last review. Moody's net cash flow reflects a weighted
average haircut of 19% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.6%.
Moody's actual and stressed DSCRs are 1.16X and 1.46X,
respectively, compared to 1.45X and 1.35X 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 loans represent 60% of the pool balance.
The largest loan is the Fruitvale Shopping Center Loan ($16.7
million -- 23.6% of the pool), which is secured
by a 163,000 square foot retail center located in Oakland,
California. The complex is 97% leased compared to 100%
at last review. The anchor tenants include Albertson's and Office
Depot, which collectively lease 57% of the premises on long
term leases. Moody's LTV and stressed DSCR are 56% and 1.83X,
respectively, compared to 62% and 1.66X at last review.
The second largest loan is the Clinton Hill Apartments Loan ($14.0
million -- 19.7% of the pool), which is secured
by a 1,221-unit cooperative apartment complex located in
Brooklyn, New York. The property was 99% leased as
of September 2010, essentially the same as last review. Moody's
LTV and stressed DSCR are 80% and 1.28X, respectively,
compared to 86% and 1.19X at last review.
The third largest loan is the Boulevard Gardens Apartments Loan ($12.0
million -- 16.9% of the pool), which is secured
by a 968 unit cooperative apartment complex located in Queens, New
York. The property was 100% leased as of October 2010 compared
to 99% at last review. Moody's LTV and stressed DSCR are
83% and 1.25X, respectively, compared to 89%
and 1.15X 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 Two CMBS Classes of GMAC 1997-C2
250 Greenwich Street
New York, NY 10007