Anda di halaman 1dari 7

Presale: Hometown Commercial Trust 2006-1 Page 1 of 7

CLOSE

Credit Ratings - Presale Credit Reports

Credit Ratings

Presale: Hometown Commercial Trust 2006-1


Primary Credit Analyst:
Steve Stowers, New York (1) 212-438-0107;
steven_stowers@standardandpoors.com
Secondary Credit Analyst:
Barbara Duka, New York (1) 212-438-2447; Publication date: 22-Nov-06, 13:07:50 EST
barbara_duka@standardandpoors.com Reprinted from RatingsDirect

Quick Links
$149.192 Million $149.192 Million Commercial Mortgage Pass-Through
Commercial Mortgage Certificates Series 2006-1
Pass-Through Certificates
Series 2006-1 This presale report is based on information as of Nov. 22, 2006. The
ratings shown are preliminary. This report does not constitute a
Rationale recommendation to buy, hold, or sell securities. Subsequent information
may result in the assignment of final ratings that differ from the preliminary
Structural And Legal Review
ratings.
Pool Characteristics
Preliminary Ratings As Of Nov. 22, 2006
Credit Evaluation
Approximate Approximate %
Preliminary Preliminary Principal
Class credit support of cutoff date
rating* amount ($) window
(%) balance
December
A AAA 125,694,000 15.75 84.25 2012 – August
2016
August 2016 –
B AA 3,357,000 13.50 2.25 September
2016
September
C AA- 1,679,000 12.38 1.13 2016 – October
2016
October 2016 –
D A 3,170,000 10.25 2.12
October 2016
October 2016 –
E BBB+ 4,289,000 7.38 2.87 November
2016
November
2016 –
F BBB 1,492,000 6.38 1.00
November
2016
November
2016 –
G BBB- 1,865,000 5.13 1.25
November
2016
December
2006 –
X (3) AAA 141,546,000 N/A N/A
November
2016
Nonoffered certificates
November
2016 –
H BB+ 1,119,000 4.38 0.75
November
2016
November
2016 –
J BB 560,000 4.00 0.38
November
2016
November
2016 –
K BB- 746,000 3.50 0.50
November
2016

November

https://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_art... 12/1/2006
Presale: Hometown Commercial Trust 2006-1 Page 2 of 7
2016 –
L B+ 372,000 3.25 0.25 November
2016
November
2016 –
M B 560,000 2.88 0.38
November
2016
November
2016 –
N B- 559,000 2.50 0.37
November
2016
November
2016 –
O NR 3,730,752 0.00 2.50
November
2016
*The rating of each class of securities is preliminary and subject to change at any time. N/A—
Not applicable. NR—Not rated.

Profile
Expected closing date: Nov. 30, 2006
Collateral: 45 loans secured by 49 properties
Manager: RBS Greenwich Capital
Seller: Hometown Commercial Capital LLC
Master/special servicer: Midland Loan Services Inc.
Depositor: HCC Mortgage Corp. I
Trustee: LaSalle Bank N.A.

Rationale
The preliminary ratings assigned to Hometown Commercial Trust 2006-
1's $149.192 million commercial mortgage pass-through certificates series
2006-1 reflect the credit support provided by the subordinate classes of
certificates, the liquidity provided by the trustee, the economics of the
underlying loans, and the geographic and property type diversity of the
loans. Standard & Poor's Ratings Services' analysis determined that, on a
weighted average basis, the pool has a debt service coverage (DSC) of
1.11x, a beginning LTV of 105.5%, and an ending LTV of 96.1%. The pool
includes six loans that consist of related loans that are cross-defaulted
and cross-collateralized with each other. For the purposes of this report,
crossed loans are considered to be one loan.

Strengths
The transaction exhibits the following strengths:

z Forty-one loans (93.3% of the pool) are fully or limited recourse


to the sponsor and, if applicable, the guarantors; and
z All 45 loans in the pool are structured with amortization.

Concerns and mitigating factors


This transaction exhibits the following concerns and mitigating factors:

z The pool exhibits geographic concentration, with 64.2% of the


mortgaged properties concentrated in five states. The largest
concentrations are in Tennessee (14.8%), California (14.4%),
Alabama (13.1%), Texas (11.4%), and New York (10.5%).
However, the remaining assets are dispersed throughout 16
states, with no other state concentration exceeding 5.5% of the
pool balance. Standard & Poor's took geographic concentration
into consideration when determining credit support levels for this
transaction;

https://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_art... 12/1/2006
Presale: Hometown Commercial Trust 2006-1 Page 3 of 7
z The pool has asset concentration in unanchored retail (23.2%),
office (12.4%), and hotel (11.7%), which Standard & Poor's
considers to be relatively less-stable asset types. Standard and
Poor's adjusted default probability and loss severity to account
for volatile assets and adjusted credit support levels for asset
class concentrations; and
z The pool exhibits related borrower/loan concentration, with the
largest related borrower/sponosor representing 13.7% of the
pool. In addition, all the borrowers of the top 10 related
borrowers/sponsors are structured as special-purpose entities
(SPEs). Standard and Poor's took into account borrower
concentrations when determining subordination levels for this
transaction.

Structural And Legal Review

Transaction structure
The certificates issued by the trust represent the beneficial ownership
interest in 45 fixed-rate mortgage loans.

Pool Characteristics

Collateral description
The pool contains 45 fixed-rate mortgage loans secured by liens on 49
properties. By property type, the pool has the following composition:
industrial (27.2%), unanchored retail (23.3%), multifamily (14.9%),
office (12.4%), hospitality (11.7%), retail anchored (5.3%), and self-
storage (5.2%).

None of the loans in the pool has been structured with a lockbox or
cash management feature. Standard & Poor's took into account the
extent of the loans without lockboxes or cash management features
when sizing subordination levels for the pool.

None of the loans in the pool has been structured with real estate tax
and insurance premium escrows. Standard & Poor's took into account
the extent of the loans without real estate tax and insurance premium
escrows when sizing subordination levels for the pool.

Geographic diversity
The mortgage loans are dispersed in 21 states with the largest
concentrations in Tennessee (14.8%); California (14.4%); Alabama
(13.1%) Texas (11.4%), New York (10.5%), Florida (5.5%). The
remaining assets are located throughout 15 states with no other state
concentration exceeding 5.0% of the pool balance.

Loan sellers
Hometown Commercial Capital LLC originated 100% of the mortgage
loans.

Loan origination dates


All but one mortgage loan (98% of the pool) was originated in the past
12 months. In addition, all of the mortgage loans were originated within
the past 18 months of the cutoff date.

Agreed-upon procedures
Agreed-upon procedures were not performed for any of the mortgage
loans in the pool.

Hyperamortizing loans
None of the loans was structured as a hyperamortizing loan.

https://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_art... 12/1/2006
Presale: Hometown Commercial Trust 2006-1 Page 4 of 7

Interest-only loans
None of the loans in the pool has been structured with full- or partial-
term interest-only payments.

Collateral quality
Based on Standard & Poor's analysis, the pool has a DSC of 1.11x
on a weighted average coupon of 7.31%. Standard & Poor's DSC
reflects adjustments made to the net cash flow (NCF) of the properties
based on the bankers' underwriting; the appraisals, historical, and
projected operating statements; and the assets' competitive positions
in their respective markets.

Standard & Poor's adjusted the NCF of the portfolio downward by 9.0%
on a weighted average basis. This decrease reflects adjustments to
rental rates, other income levels, occupancy levels, operating
expenses, capital expenditure reserves, and tenant improvements and
leasing commission assumptions.

Standard & Poor's weighted average beginning LTV for the pool is
105.5%, and the weighted average ending LTV is 96.1%. The
weighted average capitalization rate applied to Standard & Poor's NCF
is 9.85%. Capitalization rates are a function of asset type, quality,
tenancy, position in the competitive set, and current and future market
conditions.

Properties
Standard & Poor's inspected assets representing 20% of the total pool
and re-underwrote cash flows and derived asset values for assets
representing 56% of the pool. The weighted average quality score for
the inspected properties is 3.03, an average score on Standard &
Poor's scale of 1 (highest) to 5 (lowest).

Bankruptcy issues
One loan, the 1440 Harrison Street loan (0.2% of the pool), has been
made to a borrower that was previously involved in bankruptcy
proceedings. The sponsor of the 1440 Harrison Street loan filed for
Chapter 11 twice. Both cases were dismissed, and all bankruptcy
issues have been resolved. In addition, the borrower has been
structured as a SPE.

Single-tenant loans
Fourteen loans (32.9% of the pool) are secured by properties that are
occupied by single tenants. Four (6.1%) of the loans have leases that
expire before the loan maturity. Two loans (3.7%) have tenants that
are investment grade. Theses loans were subjected to harsher default
and loss severity assumptions in the modeling of subordination levels.

Leasehold interests
One loan, the 1440 Harrison Street loan (1.9%), is secured by a
mortgage lien on the borrower's leasehold interest pursuant to a
ground lease. The ground lease expires in 2015, one year prior to loan
maturity. However, the ground lease has two 10-year extension
options. In addition, in the event of default, the lender has notice and
cure rights.

Additional indebtedness
None of the loans has existing secondary debt in the form of a secured
second mortgage. In addition, all of the borrowers are prohibited from
incurring future secured secondary debt.

None of the borrowers has additional unsecured debt. However, the


borrowers are not prohibited from incurring future unsecured debt. The
potential for future unsecured debt was taken into account by Standard
& Poor's in sizing subordination levels for the pool.

https://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_art... 12/1/2006
Presale: Hometown Commercial Trust 2006-1 Page 5 of 7

Appraisal reports
Appraisal reports were prepared in the past year for all of the
properties securing the mortgage loans (100.0% of the pool).

Environmental review
Phase I environmental studies were prepared for all 49 properties
(100.0%) in the pool. All but one loan (4.4%) had phase I
environmental studies completed within 12 months. All of the loans had
phase I environmental studies completed within the past 18 months.
Three properties (4.9%) had phase II environmental studies
completed. All of the phase II environmental studies recommended no
further action. For one loan (1.6%), the phase II study recommended
an operating and maintenance plan to manage asbestos.

Structural review
Engineering reports were prepared by independent, licensed engineers
for all of the properties (100.0%) in the pool. Up-front deferred-
maintenance reserves were established for six loans (13.3%), and
three of the loans (4.3%) provide for ongoing capital expenditure
reserves. Further, engineering reports were completed for all of the
properties in the pool within the past 13 months.

Seismic review
Seven loans (14.3%) are secured by properties in seismic zones 3 or
4. Seismic studies were completed for all seven loans. None of the
properties had a probable maximum loss greater than 20%.

Hurricane and flood review


Five loans (11.0%) in the pool have windstorm insurance in place. In
addition, 11 loans (25.1%) have flood insurance.

Credit Evaluation
The following tables provide further analysis of the cash flow and
valuation of the various property types, the top 10 loan characteristics,
and Standard & Poor's DSC ratio and LTV stratification ranges.

Table 1 Cash Flow Analysis And Valuation


NCF Cap Value per
% of DSC Beginning Ending
Property type diff.* rate unit/sq. ft.
pool (x) LTV (%) LTV (%)
(%) (%) ($)
Multifamily 14.9 1.10 8.8 8.50 95.6 90.1 44,353
Retail/anchored 5.3 1.20 7.7 9.25 93.1 85.8 50
Office 12.4 0.85 6.0 9.69 116.7 107.2 63
Industrial 20.9 1.26 0.4 9.58 91.3 85.1 35
Self-storage 5.2 1.35 5.8 10.66 96.5 84.6 11,934
Hotel 11.7 1.04 29.1 12.25 131.6 117.8 39,783
Warehouse 6.3 0.98 12.6 9.00 113.2 99.6 35
Retail/unanchored 23.2 1.12 8.4 10.03 108.1 97.0 87
Total 100.0 1.11 9.0 9.85 105.5 96.1 —
*Difference between Standard & Poor's estimated NCF as a percentage of underwriter's
estimated NCF. DSC—Debt service coverage. NCF—Net cash flow.

Table 2 Top Ten Loans


Value
NCF Cap Ending
Property % of DSC Beginning per
Property type diff.* rate LTV
name pool (x) LTV (%) unit/sq.
(%) (%) (%)
ft. ($)
Turtle
Creek Multifamily garden 9.7 1.12 7.42 8.50 92.78 88.30 48,744
Apartments

https://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_art... 12/1/2006
Presale: Hometown Commercial Trust 2006-1 Page 6 of 7
Industrial
28 Gaylord 5.0 1.19 0 9.50 95.16 90.45 18
office/warehouse
140
Industrial research
Sparkman 4.8 1.41 0 9.75 83.06 78.95 41
and development
Drive
701- 901
Grant Office/suburban 4.6 0.47 0 9.50 116.36 107.62 19
Avenue
2211
Butterfield Office/suburban 4.3 1.01 12.02 9.50 123.37 117.06 98
Road
Parkway
Self-storage 4.0 1.40 6.05 10.66 95.08 82.92 14,180
Storage
Peter
Harris Retail/unanchored 4.0 1.19 14.89 10.00 102.55 90.18 66
Portfolio
MT
Industrial
Industrial 3.8 0.96 12.62 9.00 118.71 103.78 35
warehouse/distribution
Bldg
Comfort
Lodging/limited
Inn - 3.7 1.27 29.08 12.25 99.17 93.05 55,327
service
Galveston
Boaz
Retail/unanchored 3.4 1.09 4.25 10.50 117.43 111.55 13
Outlet Mall
Weighted
— 47.4 1.11 7.98 9.71 102.50 95.06 0
avg.
*Difference between Standard & Poor's estimated NCF and underwriter's NCF as a percentage
of underwriter's estimated NCF. DSC—Debt service coverage. NCF—Net cash flow.

Table 3 Standard & Poor's DSC Range


DSC range (x) No. of loans Loan balance ($) % of total
>0.65 0 0 0.0
1.65 to 1.55 0 0 0.0
1.55 to 1.50 1 1,161,446 0.8
1.50 to 1.45 0 0 0.0
1.45 to 1.40 2 13,167,626 8.8
1.40 to 1.35 2 5,334,888 3.6
1.35 to 1.30 0 0 0.0
1.30 to 1.25 4 10,932,855 7.3
1.25 to 1.20 5 14,447,740 9.7
1.20 to 1.15 5 19,759,308 13.3
1.15 to 1.10 7 26,641,406 17.9
1.10 to 1.05 4 9,262,613 6.2
1.05 to 1.00 5 15,476,828 10.4
1.00 to 0.00 10 32,932,973 22.1
Totals 45 149,117,683 100.0
DSC—Debt service coverage.

Table 4 Standard & Poor's Beginning LTV Ratio


Beginning balance LTV range (%) No. of loans Loan balance ($) % of total
<50 0 0 0.0
50 to 60 0 0 0.0
60 to 70 1 1,161,446 0.8
70 to 75 0 0 0.0
75 to 80 0 0 0.0
80 to 85 1 7,167,626 4.8
85 to 90 4 7,653,396 5.1
90 to 95 7 32,705,741 21.9

https://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_art... 12/1/2006
Presale: Hometown Commercial Trust 2006-1 Page 7 of 7
95 to 100 6 24,434,425 16.4
>100 26 75,995,050 51.0
Total 45 149,117,683 100.0

Table 5 Standard & Poor's Ending LTV Ratio


Ending balance LTV range of fully amortizing No. of Loan balance % of
loans (%) loans ($) total
<1 0 0 0.0
1 to 50 0 0 0.0
50 to 60 1 1,161,446 0.8
60 to 70 0 0 0.0
70 to 75 2 3,497,352 2.3
75 to 80 3 12,467,626 8.4
80 to 85 4 13,220,670 8.9
85 to 90 8 30,024,854 20.1
90 to 95 9 32,163,259 21.6
95 to 100 4 6,408,956 4.3
>100 14 50,173,520 33.6
Total 45 149,117,683 100.0

Analytic services provided by Standard & Poor’s Ratings Services (“Ratings Services”) are the result of separate activities designed to preserve the
independence and objectivity of ratings opinions. Credit ratings issued by Ratings Services are solely statements of opinion and not statements of
fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. Accordingly, any user of credit ratings
issued by Ratings Services should not rely on any such ratings or other opinion issued by Ratings Services in making any investment decision.
Ratings are based on information received by Ratings Services. Other divisions of Standard & Poor’s may have information that is not available to
Ratings Services. Standard & Poor’s has established policies and procedures to maintain the confidentiality of non-public information received during
the ratings process.

Ratings Services receives compensation for its ratings. Such compensation is normally paid either by the issuers of such securities or third parties
participating in marketing the securities. While Standard & Poor’s reserves the right to disseminate the rating, it receives no payment for doing so,
except for subscriptions to its publications. Additional information about our fee policy is available at www.standardandpoors.com/usratingsfees.

Disclaimers Privacy Notice Terms of Use Regulatory Disclosures Site Map Help
Copyright (c) 2006 Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.

https://www2.standardandpoors.com/servlet/Satellite?pagename=sp/sp_article/ArticleTemplate&c=sp_art... 12/1/2006