Moody's Investors Service has cut its rating of First Union Real Estate Equity and Mortgage Investments senior unsecured debt to B 1 from Ba2.

The downgrading affects about $105 million of debt.

In a statement, the agency said the downgrade was based on the division's "limited financial flexibility and performance problems with certain property holdings."

Moody's also noted that after an extended period of reduced investment spending, First Union Real Estate would likely need to increase capital expenditures in order to support the value of its real estate assets.

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