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Rating Action:

Moody's Affirms 4 CMBS Classes of GECMC 2001-1

18 Jul 2013

Approximately $42 Million of Structured Securities Affected

New York, July 18, 2013 -- Moody's Investors Service (Moody's) affirmed the ratings of four classes of GE Capital Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2001-1 as follows:

Cl. H, Affirmed Caa1 (sf); previously on Sep 1, 2011 Upgraded to Caa1 (sf)

Cl. I, Affirmed C (sf); previously on Jan 13, 2011 Downgraded to C (sf)

Cl. J, Affirmed C (sf); previously on Jan 13, 2011 Downgraded to C (sf)

Cl. X-1, Affirmed Caa3 (sf); previously on Aug 22, 2012 Downgraded to Caa3 (sf)

RATINGS RATIONALE

The affirmation of Class H is 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. Based on our current base expected loss, the credit enhancement level for Class H is sufficient to maintain its current rating.

The current ratings of Classes I and J reflect Moody's expected loss for these classes and thus are affirmed.

The ratings of the interest-only (IO) classes, Class X-1, is consistent with the expected credit performance of its referenced classes and thus is affirmed.

Moody's rating action reflects a cumulative base expected loss of 38.4% of the current pooled balance compared to 46.5% at last review. Realized losses have increased by $8 million since Moody's last review. Moody's based expected loss plus realized losses is now 6.1% compared to 6.5% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for the classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes.

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 current 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 extent of growth in the current macroeconomic environment given the weak pace of recovery in the 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 methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Moody's also utilized a loss and recovery approach in rating the P&I classes in this deal since 54% of the pool is in special servicing. In this approach, Moody's determines a probability of default for each specially serviced loan and determines a most probable loss given default based on a review of broker's opinions of value (if available), other information from the special servicer and available market data. The loss given default for each loan also takes into consideration servicer advances to date and estimated future advances and closing costs. Translating the probability of default and loss given default into an expected loss estimate, Moody's then applies the aggregate loss from specially serviced loans to the most junior class(es) and the recovery as a pay down of principal to the most senior class(es). The analyst may have also identified troubled loans which are blown up in addition to specially serviced loans.

Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.62 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 (sf) level are driven by a paydown analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in our analysis. Based on the model pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit assessments is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the credit assessment level, is incorporated for loans with similar credit assessments in the same transaction.

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.

Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 4, compared to 6 at Moody's prior review.

In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel based Large Loan Model v 8.5 and then reconciles and weights the results from the two models in formulating a rating recommendation. 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.

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 a review utilizing MOST® (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated August 22, 2012. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

DEAL PERFORMANCE

As of the June 17, 2013 distribution date, the transaction's aggregate pooled certificate balance has decreased by 96% to $42 million from $1.1 billion at securitization. The Certificates are collateralized by six mortgage loans ranging in size from less than 4% to 36% of the pool. The pool does not contain any defeased loans or loans with credit assessments.

Two loans, representing 16% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) 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.

Twenty-eight loans have been liquidated from the pool, resulting in an aggregate realized loss of $53 million (43% average loss severity). Two loans, representing 54% of the pool, are currently in special servicing. The largest specially serviced loan is the Hawthorn Suites Loan ($15 million -- 35.6% of the pool), which is secured by a 280 room limited-service hotel located in Atlanta, Georgia. The loan transferred to special servicing in April 2009 and the property became real estate owned (REO) in December 2012. The servicer is preparing to market the property for sale.

The other specially serviced loan is the Jantzen Park Loan ($8 million -- 18.0%), which is secured by a 115,000 square foot (SF) mixed-use complex. The loan transferred to special servicing in September 2010 and became REO in September 2012. The retail component is fully leased, but the office component is only 55% leased as of April 2013. The property is currently under contract with closing expected in the third quarter of 2013.

The servicer has recognized an aggregate $16 million appraisal reduction for the two specially serviced loans, while Moody's estimates a $15 million loss (65% average loss severity).

Based on the most recent remittance statement, Classes H through N have experienced cumulative interest shortfalls totaling $5 million. Moody's anticipates that the pool will continue to experience interest shortfalls because of the high exposure to specially serviced loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions (ASERs), extraordinary trust expenses, loan modifications that include either an interest rate reduction or a non-accruing note component, and non-recoverability determinations by the servicer that involve either a clawback of previously made advances or a decision to stop making future advances.

Moody's was provided with full year 2011 and partial or full year 2012 operating results for 100% of the pool's loans. Moody's weighted average conduit LTV is 72% compared to 79% at Moody's prior review. The conduit portion of the pool excludes the two specially serviced loans. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.4%.

Moody's actual and stressed conduit DSCRs are 1.20X and 1.82X, respectively, compared to 1.14X and 1.59X 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 stressed DSCR is greater than Moody's actual DSCR for this transaction because the actual debt constant for the pool is greater than Moody's 9.25% stressed rate.

The top three performing conduit loans represent 43% of the pool balance. The largest loan is the Roswell Corners Shopping Center Loan ($8 million -- 18.5% of the pool), which is secured by a 137,000 SF retail center located in suburban Atlanta, Georgia. The property is shadow anchored by Target. The property is fully leased as of December 2012, which is the same as at last review. Twenty-three percent of the net rentable area (NRA) expires in 2013-2014. Moody's LTV and stressed DSCR are 43% and 2.40X, respectively, compared to 46% and 2.22X at last review.

The second largest conduit loan is the Courtyard by Marriott - Manchester Loan ($5 million -- 12.3% of the pool), which is secured by a 90 room limited-service hotel located in Manchester, Connecticut. The loan was transferred to special servicing in April 2010 due to imminent default. The loan was modified in special servicing to extend the maturity date to June 2014. The loan was returned to the master servicer in July 2011. The property's 2012 revenue per available room (RevPAR) decreased by 7% to $69 from $74 in 2011. The decline in performance is mainly attributed to lost revenue during the property's lobby and room renovations. Moody's LTV and stressed DSCR are 129% and 1.01X, respectively, compared to 126% and 1.03X at last review.

The third largest conduit loan is the 524 Lamar Loan ($5 million -- 12.2% of the pool), which is secured by a 36,000 SF office property located in downtown Austin, Texas. The property is 100% leased to 10 tenants, essentially the same as last review. Property performance has improved due to increases in base rent and expense reimbursements. Eighty seven percent of the NRA expires before the loan's January 2015 maturity. Moody's LTV and stressed DSCR are 63% and 1.81X, respectively, compared to 81% and 1.40X at last review.

REGULATORY DISCLOSURES

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

In conducting surveillance of this credit, Moody's considered performance data contained in servicer and remittance reports. Moody's obtains servicer reports on this transaction on a periodic basis, at least annually.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Simon
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Michael Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms 4 CMBS Classes of GECMC 2001-1
No Related Data.
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