Approximately $186.7 Million of Structured Securities Affected
New York, June 04, 2014 -- Moody's Investors Service has affirmed the ratings on ten classes and
downgraded the rating on one class in Greenwich Capital Commercial Funding
Corp., Commercial Mortgage Trust 2004-GG1 as follows:
Cl. E, Affirmed A1 (sf); previously on Dec 5,
2013 Affirmed A1 (sf)
Cl. F, Affirmed Baa1 (sf); previously on Dec 5,
2013 Affirmed Baa1 (sf)
Cl. G, Affirmed Baa3 (sf); previously on Dec 5,
2013 Affirmed Baa3 (sf)
Cl. H, Affirmed B1 (sf); previously on Dec 5,
2013 Downgraded to B1 (sf)
Cl. J, Affirmed B3 (sf); previously on Dec 5,
2013 Downgraded to B3 (sf)
Cl. K, Affirmed Caa1 (sf); previously on Dec 5,
2013 Downgraded to Caa1 (sf)
Cl. L, Affirmed Caa2 (sf); previously on Dec 5,
2013 Downgraded to Caa2 (sf)
Cl. M, Affirmed Caa3 (sf); previously on Dec 5,
2013 Downgraded to Caa3 (sf)
Cl. N, Affirmed C (sf); previously on Dec 5, 2013
Affirmed C (sf)
Cl. O, Affirmed C (sf); previously on Dec 5, 2013
Affirmed C (sf)
Cl. XC, Downgraded to Caa1 (sf); previously on Dec 5,
2013 Affirmed Ba3 (sf)
RATINGS RATIONALE
The ratings on the P&I classes E though J were affirmed because the
transaction's key metrics, including Moody's loan-to-value
(LTV) ratio, Moody's stressed debt service coverage ratio (DSCR)
and the transaction's Herfindahl Index (Herf), are within
acceptable ranges. The ratings on the P&I Classes K through
O were affirmed because the ratings are consistent with Moody's expected
loss.
The rating of the IO Class (Class XC) was downgraded due to the decline
in the credit performance of its reference classes resulting from principal
paydowns of higher quality reference classes.
Moody's rating action reflects a base expected loss of 29.6%
of the current balance compared to 6.2% at Moody's last
review. Moody's base expected loss plus realized losses is now
3.6% of the original pooled balance compared to 3.5%
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.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. Performance
that falls outside the given range can indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant
amount of loan paydowns or amortization, an increase in the pool's
share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline
in the performance of the pool, loan concentration, an increase
in realized and expected losses from specially serviced and troubled loans
or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
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.
DESCRIPTION OF MODELS USED
Moody's review used the excel-based CMBS Conduit Model v 2.64,
which it uses 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 Moody's uses to estimate Moody's
value). Conduit model results at the B2 (sf) level are based on
a paydown analysis using the individual loan-level Moody's LTV
ratio. Moody's may consider other concentrations and correlations
in its analysis. Based on the model pooled credit enhancement levels
of Aa2 (sf) and B2 (sf), the required credit enhancement on 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, Moody's merges the credit
enhancement for loans with investment-grade credit assessments
with the conduit model credit enhancement for an overall model result.
Moody's incorporates negative pooling (adding credit enhancement at the
credit assessment level) for loans with similar credit assessments in
the same transaction.
Moody's uses a variation of Herf to measure the diversity of loan sizes,
where a higher number represents greater diversity. Loan concentration
has an important bearing on 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 of 4 compared
to 15 at Moody's last 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 8.7 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.
DEAL PERFORMANCE
As of the May 12, 2014 distribution date, the transaction's
aggregate certificate balance has decreased by 93% to $191.9
million from $2.6 billion at securitization. The
certificates are collateralized by 12 mortgage loans ranging in size from
less than 1% to 43% of the pool, with the top ten
loans constituting 99% of the pool.
Three loans, constituting 46% of the pool, are on the
master servicer's watchlist. The watchlist includes loans that
meet certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, the agency reviews the watchlist
to assess which loans have material issues that could affect performance.
Sixteen loans have been liquidated at a loss from the pool, resulting
in an aggregate realized loss of $37.1 million (for an average
loss severity of 25%). There are currently six loans in
special servicing, constituting 42% of the pool. The
loans are secured by a mix of property type and three of them are already
REO or in the process of foreclosure. The largest specially serviced
loan is the Severance Town Center Loan ($39.7 million --
20.7% of the pool), which is secured by a 644,501
square foot (SF) retail property located in Cleveland Heights, Ohio.
Economic occupancy is 91% while physical occupancy is approximately
70% due to large tenant (Walmart) vacating but continuing to pay
rent per lease obligation. The loan matured on April 1, 2014.
The special servicer is in the process of appointing receiver and filing
for foreclosure. Moody's estimates an aggregate $27.8
million loss for specially serviced loans (34 % expected loss on
average).
Moody's has assumed a high default probability for one poorly performing
loan and the B note associated with the Aegon Center Loan, constituting
13% of the pool, and has estimated an aggregate loss of $16.8
million (a 67% expected loss based on a 71% probability
default) from these troubled loans.
Moody's received full year 2012 operating results for 100% of the
pool, and full or partial year 2013 operating results for 97%
of the pool, excluding specially serviced loans. Moody's
weighted average conduit LTV is 112% compared to 88% at
Moody's last review. Moody's conduit component excludes defeased,
specially serviced and troubled loans. Moody's net cash flow (NCF)
reflects a weighted average haircut of 10% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 9.7%.
Moody's actual and stressed conduit DSCRs are 1.47X and 1.07X,
respectively, compared to 1.69X and 1.28X at the last
review. Moody's actual DSCR is based on Moody's NCF and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stress rate the agency applied to the loan
balance.
The top three conduit loans represent 56.8% of the deal.
The largest loan is the Aegon Center Loan ($103.1 million
-- 53.7% of the pool), which is secured by a
759,650 SF 34-story Class A office located in Louisville,
Kentucky. As of December 2013, the property was 72%
leased compared to 74% at last review. The loan had been
in special servicing for imminent monetary default due to Aegon's lease
expiring in December 2012. The loan was modified in August 2013
and returned to the master servicer on November 7, 2013.
The loan was modified into a 80/20 A/B note split, resulting in
an $82 million A-note and a $21.1 million
B-note and the loan maturity was extended to April 2019 from April
2014. The interest rate on the A-note was reduced to 4%
from 6.415% for three years. This modification has
caused significant interest shortfalls. Although the loan is current,
Moody's is concerned about the refinancing risk given the property's
depressed occupancy level and the fact that leases for a significant portion
of the building expire around the time of the loan maturity. Moody's
current LTV and stressed DSCR on the A-note are 116% and
0.91X, respectively, compared to 100% and 1.05X
at last review.
The second largest loan is the Rockefeller Industrial Building Loan ($3.8
million -- 2.0% of the pool). The loan is secured
by a 130,916 SF industrial property located in Ceres, California.
The loan has returned to the master servicer from the special servicer
on March 11th 2014 after being modified. Although, occupancy
increased to 74% as of December 2013 from 39% in 2011,
the loan is still poorly performing. As of December 2013 reported
DSCR was only 0.12X. The loan has been recognized as a troubled
loan. Moody's LTV and stressed DSCR are 145% and 0.71X,
respectively.
The third largest loan is the Bangor Plaza Loan ($2.2 million
-- 1.1% of the pool). The loan is secured
by a 135,059 SF retail property located in Pen Argyl, Pennsylvania.
As of December 2013 the property was 91% leased compared to 55%
in December 2012. In 2013, Lehigh Valley Hospital leased
37% of the premises with a lease expiration on December 1,
2023. Moody's current LTV and stressed DSCR are 51% and
0.77X, respectively, compared to 49% and 2.11X
at last review.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions of the disclosure form.
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.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
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.
Dariusz Surmacz
Asst Vice President - 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
Keith Banhazl
VP - Sr Credit Officer/Manager
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 Ten and Downgrades One Class of GCCFC 2004-GG1
