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Rating Action:

Moody's Affirms 19 and Downgrades Six CMBS Classes of GECMC 2004-C2

Global Credit Research - 13 Aug 2010

Approximately $1.1 Billion of Structured Securities Affected

New York, August 13, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of 19 classes and downgraded six classes of GE Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2004-C2. The downgrades are due to higher expected losses for the pool resulting from anticipated losses from specially serviced and poorly performing watchlisted loans and refinance risk associated with loans approaching maturity in an adverse environment. Five loans, representing 3% of the non-defeased pool, mature within the next two years and have a Moody's stressed debt service coverage ratio (DSCR) less than 1.0X.

The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl Index (Herf) remaining within acceptable ranges. In addition, the pool benefits from increased subordination resulting from amortization and loan payoffs. The pool's outstanding balance has declined by 16% since Moody's last review.

The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions.

As of the July 12, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 19% to $1.1 billion from $1.4 billion at securitization. The Certificates are collateralized by 106 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top ten loans representing 42% of the pool. Thirteen loans, representing 13% of the pool, have defeased and are secured by U.S. Government securities.

The pool includes three loans with underlying ratings, representing 17% of the outstanding loan balance. At last review, the Lake Grove Plaza Loan also had an investment grade underlying rating. Due to increased leverage the loan no longer has an underlying rating and is analyzed as part of the conduit pool.

Twenty-four loans, representing 19% of the pool, are on the master servicer's watchlist, including two of the top ten loans in the pool. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council's (CREFC; formerly Commercial Mortgage Securities Association) monthly reporting package. As part of our ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance.

The pool has experienced a $1.3 million loss (32% loss severity on average) since securitization. One loan, representing 1% of the pool, is currently in special servicing. This loan is the Continental Communities -- Rolling Hills MHC Loan ($7.5 million -- 0.7% of the pool), which is secured by a manufactured housing property located in Massillon, Ohio. The loan was transferred to special servicing on March 12, 2009 due to maturity default. The loan is current and the maturity was extended to October 2010 with an additional conditional extension to April 2011. Moody's is concerned that this loan has a high probability of default and has recognized a $1.3 million loss (17% expected loss) for the loan.

In addition to recognizing a loss from the specially serviced loan, Moody's has assumed a high default probability on five loans representing 5% of the pool and has estimated an aggregate loss of $17.6 million (31% expected loss based on an overall 66% default probability) from these troubled loans. Moody's rating action recognizes potential uncertainty around the timing and magnitude of loss from these troubled loans.

Moody's was provided with full-year 2008 and 2009 operating results for 82% and 38%, respectively, of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV ratio is 87% compared to 93% at Moody's last review.

Excluding specially serviced and troubled loans, Moody's actual and stressed DSCR are 1.41X and 1.18X, respectively, compared to 1.33X and 1.05X 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.

Moody's uses a variation of the Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on the potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf score of 31 compared to 53 at last review.

The largest loan with an underlying rating is the Tysons Corner Center Loan ($88.6 million -- 7.9%), which represents a 27.9% pari-passu interest in a first mortgage loan. The loan is secured by the borrower's interest in a 2.0 million square foot regional mall located in McLean, Virginia. The mall is anchored by Bloomingdale's, Macy's Nordstrom and Lord & Taylor. The property's financial performance has improved since securitization due to additional rental income from a 265,000 square foot renovation/expansion that was completely in 2007. The property is currently 100% leased. The loan has amortized 5% since last review. Moody's current underlying rating and stressed DSCR are Aaa and 2.27X, respectively, compared to Aa1 and 2.22X at last review.

The second largest loan with an underlying rating is the Pacific Place Loan ($80.3 million -- 7.2%), which is secured by a two-building mixed use property including retail, office and leased hotel components. The property is located in the Union Square submarket of San Francisco, California. The two buildings are referred to as Pac One and Pac Two. Pac One is an eight-story property built in 1907 and renovated in 1981 and 1999. Old Navy occupies a portion of the ground floor and all of the basement, second and third floors. Part of the ground floor as well as floors five through nine are leased to the 200-room Palomor Hotel through June 2097. Pac Two is a 16-story building housing the subject's office component as well as the Container Store on the two lower levels. Pac Two was built in 1907 and renovated in 1999. As of September 2009, the complex was 100% leased, the same as at last review. The loan was interest only for the first two years and now amortizes on a 360-month schedule. The loan is divided into a senior component which is security for the pooled classes and six subordinate components which are security for non-pooled Classes PPL-A, PPL-B, PPL-C, PPL-D, PPL-E and PPL-F. The loan has amortized 6% since last review. Moody's current underlying rating and stressed DSCR are Baa2 and 1.51X, respectively, compared to Baa2 and 1.09X at last review.

The third largest loan with an underlying rating is the AFR Portfolio Loan ($11.8 million -- 1.4%), which represents a 5.9% pari-passu interest in a first mortgage loan secured by 115 properties located in various states. The properties consist of office, operation centers and retail bank branches. As of December 2009, the portfolio was 86% leased compared to 90% at last review. Six properties have been released from the pool and 31 properties, representing 24% of the loan balance, have defeased since securitization. Due to property releases, defeasance and loan amortization, the loan balance has decreased by approximately 41% since securitization. Moody's current shadow rating and stressed DSCR for the senior note are A1 and 1.25X, respectively, compared to A1 and 1.22X at last review.

The loan that previously had an underlying rating is the Lake Grove Plaza Loan ($27.0 million -- 2.4%), which is secured by a 251,000 square foot retail center built in 1986 and renovated in 1991 and 2003. The property is located in Lake Grove, New York, approximately 40 miles east of New York City. At securitization, the largest tenant was Stop & Shop, but it vacated the property in 2008. Since then, Toys R Us has taken over the vacant space alongside the other major tenants, DSW Shoe Warehouse, Staples and Michaels. As of March 2010, the property was 100% leased which is the same as at last review. Property performance has declined due to decreased revenue and increased expenses. In addition, Moody's is concerned about near-term rollover exposure. Moody's LTV and stressed DSCR are 110% and 0.83X, respectively, compared to 70% and 1.29X at last review.

The top three largest conduit exposures represent 13% of the pool. The largest loan is the Prince Building Loan ($65.9 million -- 5.9%), which is secured by a 312,570 square foot office and retail building located in the SoHo submarket of New York City. The building was built in 1897 and renovated in 1991. The 12-story, Class B office building includes 22,335 square feet of street level retail space and 312,570 square feet of office space. The largest tenant is Scholastic, which occupies 43% of the property's net rentable area (NRA) through 2013 and 2018. The three retail tenants are Equinox, Forever 21 and Armani. Although Armani only represents 4% of the NRA (lease expiration January 2012), it generates approximately 16% of the property's revenue. As of September 2009, the property was 99% leased, the same as at last review. The loan as amortized 5% since last review. Moody's LTV and stressed DSCR are 70% and 1.35X, respectively, compared to 91% and 1.04X at last review.

The second largest loan is the Princeton Office Loan ($52.1 million -- 4.7%), which is secured by a six Class A office buildings located in the 10-building College Park Research Center in Plainsboro Township, New Jersey. The complex was built in phases between 1976 and 1981 and is encumbered by a ground lease through 2037 with 20 years of options available. As of December 2009, the property was 93% leased compared to 92% at last review and 85% at securitization. The loan has amortized 5% since last review. Moody's LTV and stressed DSCR are 84% and 1.18X, respectively, compared to 97% and 1.03X at last review.

The third largest loan is the Stonebriar Plaza Loan ($28.8 million -- 2.6%), which is secured by a 182,147 square foot retail property located in Frisco, Texas. As of February 2010, the property was 67% leased compared to 97% at securitization. The property's performance has declined since last review due to the occupancy declining. Moody's believes that there is a high probability that this loan may default prior to loan maturity. The loan matures in 2014. Moody's LTV and stressed DSCR are 159% and 0.61X, respectively, compared to 114% and 0.85X at last review.

Moody's rating action is as follows:

Class A-2, $46,766,012, affirmed at Aaa (sf); previously assigned Aaa (sf) on 4/1/2004

Class A-3, $73,388,000, affirmed at Aaa (sf); previously assigned Aaa (sf) on 4/1/2004

Class A-4, $575,549,000, affirmed at Aaa (sf); previously assigned Aaa (sf) on 4/1/2004

Class A-1-A, $211,231,446, affirmed at Aaa (sf); previously assigned Aaa (sf) on 4/1/2004

Class X-1, Notional, affirmed at Aaa (sf); previously assigned Aaa (sf) on 4/1/2004

Class X-2, Notional, affirmed at Aaa (sf); previously assigned Aaa (sf) on 4/1/2004

Class B, $41,293,000, affirmed at Aa2 (sf); previously assigned Aa2 (sf) on 4/1/2004

Class C, $17,205,000, affirmed at Aa3 (sf); previously assigned Aa3 (sf) on 4/1/2004

Class D, $25,807,000 affirmed at A2 (sf); previously assigned A2 (sf) on 4/1/2004

Class E, $15,485,000 affirmed at A3 (sf); previously assigned A3 (sf) on 4/1/2004

Class F, $18,926,000 affirmed at Baa1 (sf); previously assigned Baa1 (sf) on 4/1/2004

Class G, $17,205,000 affirmed at Baa2 (sf); previously assigned Baa2 (sf) on 4/1/2004

Class H, $18,925,000 affirmed at Baa3 (sf); previously assigned Baa3 (sf) on 4/1/2004

Class J, $10,323,000 downgraded to B1(sf) from Ba1; previously assigned Ba1 (sf) on 4/1/2004

Class K, $8,603,000 downgraded to B3 (sf) from Ba2; previously assigned Ba2 (sf) on 4/1/2004

Class L, $6,882,000 downgraded to Caa2 (sf) from Ba3; previously assigned Ba3 (sf) on 4/1/2004

Class M, $5,161,000 downgraded to Caa3 (sf) from B1; previously assigned B1 (sf) on 4/1/2004

Class N, $5,162,000 downgraded to Ca (sf) from B2; previously assigned B2 (sf) on 4/1/2004

Class O, $3,441,000 downgraded to C (sf) from B3; previously assigned B3 (sf) on 4/1/2004

Class PPL-A, $3,041,356, affirmed at Baa3 (sf); previously assigned Baa3 (sf) on 4/1/2004

Class PPL-B, $3,041,356, affirmed at Ba1 (sf); previously assigned Ba1 (sf) on 4/1/2004

Class PPL-C, $4,671,088, affirmed at Ba2 (sf); previously assigned Ba2 (sf) on 4/1/2004

Class PPL-D, $5,990,974, affirmed at Ba3 (sf); previously assigned Ba3 (sf) on 4/1/2004

Class PPL-E, $3,759,336, affirmed at B1 (sf); previously assigned B1 (sf) on 4/1/2004

Class PPL-F, $4,553,140, affirmed at B2 (sf); previously assigned B2 (sf) on 4/1/2004

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 review is summarized in a press release dated March 6, 2007.

The principal methodology used in rating and monitoring this transaction is "CMBS: Moody's Approach to Rating Fusion Transactions" published on April 19, 2000, and is available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. In addition, 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.

New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's Affirms 19 and Downgrades Six CMBS Classes of GECMC 2004-C2
No Related Data.
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