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Announcement:

Moody's Affirms Sixteen CMBS Classes of GCCFC 2004-GG1

06 Jan 2012

Approximately $1.4 Billion of Structured Securities Affected

New York, January 06, 2012 -- Moody's Investors Service (Moody's) affirmed the ratings of sixteen classes of Greenwich Capital Commercial Funding Corp., Commercial Mortgage Pass-Through Certificates, Series 2004-GG1 as follows:

Cl. A-6, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

Cl. A-7, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

Cl. B, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

Cl. C, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

Cl. D, Affirmed at Aa2 (sf); previously on Feb 16, 2011 Upgraded to Aa2 (sf)

Cl. E, Affirmed at A1 (sf); previously on Feb 16, 2011 Upgraded to A1 (sf)

Cl. F, Affirmed at Baa1 (sf); previously on Jun 24, 2004 Definitive Rating Assigned Baa1 (sf)

Cl. G, Affirmed at Baa2 (sf); previously on Jun 24, 2004 Definitive Rating Assigned Baa2 (sf)

Cl. H, Affirmed at Baa3 (sf); previously on Jun 24, 2004 Definitive Rating Assigned Baa3 (sf)

Cl. J, Affirmed at Ba1 (sf); previously on Jun 24, 2004 Definitive Rating Assigned Ba1 (sf)

Cl. K, Affirmed at Ba2 (sf); previously on Jun 24, 2004 Definitive Rating Assigned Ba2 (sf)

Cl. L, Affirmed at Ba3 (sf); previously on Jun 24, 2004 Definitive Rating Assigned Ba3 (sf)

Cl. M, Affirmed at B1 (sf); previously on Jun 24, 2004 Definitive Rating Assigned B1 (sf)

Cl. N, Affirmed at Caa1 (sf); previously on Feb 16, 2011 Downgraded to Caa1 (sf)

Cl. O, Affirmed at Caa2 (sf); previously on Feb 16, 2011 Downgraded to Caa2 (sf)

Cl. XC, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed at Aaa (sf)

RATINGS RATIONALE

The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on our current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings.

Moody's rating action reflects a cumulative base expected loss of 2.6% of the current balance. At last review, Moody's cumulative base expected loss was 2.8%. Moody's provides a current list of base and stress scenario 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 investment grade 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.

The performance expectations for a given variable indicate Moody's forward-looking 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 current sluggish macroeconomic environment and performance in the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are continuing to show signs of recovery through the first half of 2011, while recovery in the non-core office and retail sectors are tied to pace of recovery of the broader economy. Core office markets are showing signs of recovery through lending and leasing activity. The availability of debt capital continues to improve with terms returning toward market norms. Moody's central global macroeconomic scenario reflects an overall sluggish recovery as the most likely scenario through 2012, amidst ongoing individual, corporate and governmental deleveraging, persistent unemployment, and government budget considerations, however the downside risks to the outlook have risen since last quarter.

The principal methodology used in this rating was "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's noted that on November 22, 2011, it released a Request for Comment, in which the rating agency has requested market feedback on potential changes to its rating methodology for Interest-Only Securities. If the revised methodology is implemented as proposed the rating on GCCFC 2004-GG1 XC may be negatively affected. Please refer to Moody's request for Comment, titled "Proposal Changing the Global Rating Methodology for Structured Finance Interest-Only Securities," for further details regarding the implications of the proposed methodology change on Moody's rating. Please see the Credit Policy page on www.moodys.com for a copy of this methodology and the Request for Comment.

Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.60 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 estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit estimate 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 estimate level, is incorporated for loans with similar credit estimates in the same transaction.

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 29 compared to 32 at Moody's prior full review.

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.

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 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 full review is summarized in a press release dated February 16, 2011. 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 December 12, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 45% to $1.45 billion from $2.63 billion at securitization. The Certificates are collateralized by 101 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten non-defeased or non-specially serviced loans representing 32% of the pool. Thirteen loans, representing 32% of the pool, have defeased and are secured by U.S. Government securities. Defeasance at last review represented 33% of the pool. The pool contains one loan with an investment grade credit estimate which represents less than 1% of the pool.

Twenty-seven loans, representing 20% 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.

Six loans have been liquidated from the pool, resulting in a realized loss of $20.0 million (1% loss severity overall). Currently seven loans, representing 3% of the pool are in special servicing. Moody's has estimated an aggregate $16 million loss (36% expected loss on average) for the specially serviced loans.

Moody's has assumed a high default probability for five poorly performing loans representing 1.3% of the pool and has estimated an aggregate $3.0 million loss (15% expected loss based on a 30% probability default) from these troubled loans.

Moody's was provided with full year 2010 operating results for 99% of the pool. Excluding specially serviced, troubled and defeased loans, Moody's weighted average LTV is 92% compared to 96% at last review. Moody's net cash flow reflects a weighted average haircut of 12% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.6%.

Excluding specially serviced, troubled and defeased loans, Moody's actual and stressed DSCRs are 1.38X and 1.20X, respectively, compared to 1.34X and 1.15X 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.

The loan with a credit estimate is the 222 East 41st Street Loan ($10.0 million -- 0.7% of the pool), which is secured by the borrower's interest in a leased fee land parcel in the Grand Central submarket in New York City. The loan is interest only for 10 years. The land is improved with a 371,000 square foot (SF)office building constructed in 1999 and leased to the Jones Day Law firm. The ground lease expires in February 2052. Moody's current credit estimate and stressed DSCR are Aa2 and 1.20X, respectively, the same as last review.

The top three performing conduit loans represent 14% of the pool balance. The largest loan is the Aegon Center Loan ($105.4 million -- 7.3% of the pool), which is secured by a 634,000 SF Class A office building located in downtown Louisville, Kentucky. It is the tallest building in the entire state and is attached to a 5-level, 791-space garage. As of November 2011, the property was 94% leased compared to 95% at last review. Major tenants include Aegon N.V. (Moody's senior unsecured rating A3 - stable outlook; 39% of the NRA; lease expiration in 2012), Frost Brown Todd (18% of the NRA; lease expiration in 2020) and Stites and Harbison (16% of the NRA; lease expiration in 2014). The loan was recently added to the watch list due to Aegon publicly announcing it's plans to downsize it's operation to approximately 60,000 SF. The loan's initial 60-month interest-only period has expired and the loan has amortized approximately 3% since last review. Moody's LTV and stressed DSCR are 106% and 1.0X, respectively, compared to 106% and .99X at last review.

The second largest loan is the Southland Mall Loan ($75.7 million -- 5.2% of the pool), which is secured by a 1.3 million SF regional mall (collateral is 1.01 MM SF) located between Oakland and San Jose in Hayward, California. Ownership is being transferred to Rouse Properties in a spin-off of non-core assets by GGP. Anchors include JCPenney, Kohl's, Macy's, and Sears (not part of collateral, not on the list of recently announced closings). As of September 2011 in-line space was 92% occupied compared to 90% at last review. However, specialty leasing represents 24% of occupied iniline space. The trailing 12-month Septermber 2011 in-line sales were $290/SF compared to $291/SF at last review and $333/SF at securitization. Moody's LTV and stressed DSCR are 75% and 1.33X, respectively, compared to 67% and 1.44X at last review.

The third largest loan is the New Roc City Loan ($58.3 million -- 4.0% of the pool), which is secured by a 451,000 SF lifestyle retail center located in New Rochelle, New York. As of September 2011, the property was 94% leased compared 85% at last review. Performance had declined during 2008 and 2009 but has stabilized over last two years with new leases representing $480K/year in rents beginning May 2011. Moody's LTV and stressed DSCR are 92% and 1.15X, respectively, compared to 88% and 1.20X at last review.

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 31 January 2012. ESMA may extend the use of credit ratings for regulatory purposes in the European Community for three additional months, until 30 April 2012, if ESMA decides that exceptional circumstances arise that may imply potential market disruption or financial instability. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics information.

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.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Andree Subervi
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 M. 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 Sixteen CMBS Classes of GCCFC 2004-GG1
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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