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11 Nov 2010
Approximately $6.8 Million of Structured Securities Affected
New York, November 11, 2010 -- Moody's Investors Service (Moody's) upgraded the rating of two non-pooled
or rake classes and affirmed the ratings of one non-pooled or rake
class and one notional interest only class of Morgan Stanley Capital I
Inc. Commercial Pass-Through Certificates, Series
2006-XLF. Moody's rating action is as follows:
Cl. X-1, Affirmed at Aaa (sf); previously on
Aug 21, 2006 Assigned Aaa (sf)
Cl. N-LAF, Upgraded to Aa2 (sf); previously on
Mar 11, 2009 Downgraded to Baa2 (sf)
Cl. N-SDF, Affirmed at B1 (sf); previously on
Mar 11, 2009 Downgraded to B1 (sf)
Cl. O-LAF, Upgraded to A2 (sf); previously on
Mar 11, 2009 Downgraded to Ba2 (sf)
The upgrades are due to principal payments associated with the Lafayette
Estates loan. 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 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 previous 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
The principal methodology used in this rating was "Moody's Approach to
Rating Large Loan/Single Borrower Transactions" published in July 2000.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
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 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 March 11, 2009. The
previous review was part of Moody's first quarter 2009 ratings sweep and
incorporated assumptions for capitalization rates and stressed cash flows
that were outlined in "Rating Methodology Update: US CMBS Conduit
and Fusion Review Prompted by Declining Property Values and Rising Delinquencies"
dated February 5, 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 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 October 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to $72.6
million from $1.6 billion at securitization. The
Certificates are collateralized by three mortgage loans ranging in size
from 15% to 47% of the pool. The largest loan in
the pool, ResortQuest ($34 million, 47% of the
pooled balance) is secured by a 307-key full service hotel in Kauai,
Hawaii that transferred to special servicing in January of 2009 due to
Moody's does not rate the remaining pooled principal classes although
it does rate the notional interest only Class X-1. Moody's
also rates the non-pooled or rake classes associated with the Sheraton
Delfina loan and the Lafayette Estates loan.
The Sheraton Delfina loan ($28 million pooled balance and $2
million non pooled balance) is secured by a 207 key full service hotel
located in Santa Monica, California. Revenue per available
room (RevPAR) for the year to date period ending June 2010 was $154.28,
up 10% from the RevPAR for the year end 2009 of $134.50.
According to Smith Travel Research, RevPAR for Los Angeles increased
5% for the same period. Moody's current LTV is 73%
and stressed DSCR is 1.71X. Moody's credit estimate rating
for the pooled balance and non pooled component are Ba3 and B1 respectively,
the same as last review.
The Lafayette Estates Loan ($10.6 million pooled balance
and $4.8 million non-pooled balance) is secured by
the borrower's interest in a co-op conversion multifamily complex
located in the Bronx, New York. As of June 2010, 1,114
or 60% of the original 1,872 units have been sold.
The remaining 758 units are still available and currently being marketed
for sale. The loan has paid down 75% since securitization.
The non-pooled component secures the N-LAF and O-LAF
rake classes. Moody's current LTV on the pooled loan is 28%
and on the non-pooled loan is 40%. Moody's current
credit estimate for the pooled loan is Aaa compared to A1 at last review.
Moody's current credit estimates for the non pooled loan is A2 compared
to Ba2 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, and confidential and proprietary Moody's
Investors Service 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.
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Upgrades Two and Affirms Two CMBS Classes of MCSI 2006-XLF
250 Greenwich Street
New York, NY 10007
No Related Data.
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