Moody’s down­grades CMBS class of FULB 1997-C2

The Pak Banker - - 6BUSINESS -

NEW YORK:

Global rat­ing agency Moody’s down­graded the rat­ing of one class of First Union-Lehman Brothers Com­mer­cial Mort­gage Trust II, Com­mer­cial Mort­gage Pass-Through Cer­tifi­cates, Se­ries 1997C2. The down­grade of Class IO, the in­ter­est-only tranche, is due to the de­creased credit qual­ity of its ref­er­enced classes due to the pay­downs of highly rated classes.

The per­for­mance ex­pec­ta­tions for a given vari­able in­di­cate Moody’s for­ward­look­ing view of the likely range of per­for­mance over the medium term. From time to time, Moody’s may, if war­ranted, change th­ese ex­pec­ta­tions. Per­for­mance that falls out­side the given range may in­di­cate that the col­lat­eral’s credit qual­ity is stronger or weaker than Moody’s had an­tic­i­pated when the re­lated se­cu­ri­ties rat­ings were is­sued. Even so, a de­vi­a­tion from the ex­pected range will not nec­es­sar­ily re­sult in a rat­ing ac­tion nor does per­for­mance within ex­pec­ta­tions pre­clude such ac­tions. The de­ci­sion to take (or not take) a rat­ing ac­tion is de­pen­dent on an as­sess­ment of a range of fac­tors in­clud­ing, but not ex­clu­sively, the per­for­mance met­rics.

Pri­mary sources of as­sump­tion un­cer­tainty are the ex­tent of growth in the cur- rent macroe­co­nomic en­vi­ron­ment given the weak pace of re­cov­ery and com­mer­cial real es­tate prop­erty mar­kets. Com­mer­cial real es­tate prop­erty val­ues are con­tin­u­ing to move in a mod­estly pos­i­tive di­rec­tion along with a rise in in­vest­ment ac­tiv­ity and sta­bi­liza­tion in core prop­erty type per­for­mance. Lim­ited new con­struc­tion and mod­er­ate job growth have aided this im­prove­ment. How­ever, a con­sis­tent up­ward trend will not be ev­i­dent un­til the vol­ume of in­vest­ment ac­tiv­ity steadily in­creases for a sig­nif­i­cant pe­riod, non-per­form­ing prop­er­ties are cleared from the pipe­line, and fears of a Euro area re­ces­sion are abated.

The ho­tel sec­tor is per­form­ing strongly with nine straight quar­ters of growth and the mul­ti­fam­ily sec­tor con­tin­ues to show in­creases in de­mand with a grow­ing renter base and de­clin­ing home own­er­ship. Re­cov­ery in the of­fice sec­tor con­tin­ues at a mea­sured pace with min­i­mal ad­di­tions to sup­ply. How­ever, of­fice de­mand is closely tied to em­ploy­ment, where growth re­mains slow and em­ploy­ers are con­sid­er­ing de­creases in the leased space per em­ployee. Also, pri­mary ur­ban mar­kets are out­per­form­ing sec­ondary sub­ur­ban mar­kets. Per­for­mance in the re­tail sec­tor con­tin­ues to be mixed with re­tail rents de­clin- ing for the past four years, weak de­mand for new space and lack­lus­ter sales driven by in­ter­net sales growth. Across all prop­erty sec­tors, the avail­abil­ity of debt cap­i­tal con­tin­ues to im­prove with ro­bust se­cu­ri­ti­za­tion ac­tiv­ity of com­mer­cial real es­tate loans sup­ported by a mon­e­tary pol­icy of low in­ter­est rates.

Moody’s cen­tral global macroe­co­nomic sce­nario calls for US GDP growth for 2013 that is likely to re­main close to 2% as the greater im­pe­tus from the US pri­vate sec­tor is likely to broadly off­set the drag on ac­tiv­ity from more re­stric­tive fis­cal pol­icy. There­after, we ex­pect the US econ­omy to ex­pand at a some­what faster pace than is likely this year, closer to its long-run av­er­age pace of growth. Risks to our fore­casts re­main skewed to the down­side de­spite re­cent pos­i­tive de­vel­op­ments. Moody’s be­lieves that the three most im­me­di­ate risks are: i) the risk of a deeper than cur­rently ex­pected re­ces­sion in the euro area ac­com­pa­nied by deeper credit con­trac­tion, po­ten­tially trig­gered by a fur­ther in­ten­si­fi­ca­tion of the sov­er­eign debt cri­sis; ii) slower-thanex­pected re­cov­ery in ma­jor emerg­ing mar­kets fol­low­ing the re­cent slow­down; and iii) an escalation of geopo­lit­i­cal ten­sions, re­sult­ing in ad­verse eco­nomic de­vel­op­ments.

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