Approximately $659.8 Million of Structured Securities Affected
New York, June 07, 2012 -- Moody's Investors Service affirmed the ratings of twelve classes and downgraded
four classes of GE Capital Commercial Funding Corp., Commercial
Mortgage Pass-Thru Certificates, Series 2003-C1 as
follows:
Cl. A-4, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
Cl. A-1A, 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 Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. E, Affirmed at Aa1 (sf); previously on Mar 9,
2011 Confirmed at Aa1 (sf)
Cl. F, Affirmed at Aa2 (sf); previously on Dec 9,
2010 Upgraded to Aa2 (sf)
Cl. G, Affirmed at A1 (sf); previously on Dec 9,
2010 Upgraded to A1 (sf)
Cl. H, Affirmed at Baa1 (sf); previously on Dec 9,
2010 Confirmed at Baa1 (sf)
Cl. J, Affirmed at Ba1 (sf); previously on Dec 9,
2010 Confirmed at Ba1 (sf)
Cl. K, Affirmed at Ba2 (sf); previously on Dec 9,
2010 Confirmed at Ba2 (sf)
Cl. L, Downgraded to Caa1 (sf); previously on Dec 9,
2010 Downgraded to B3 (sf)
Cl. M, Downgraded to Caa2 (sf); previously on Dec 9,
2010 Downgraded to Caa1 (sf)
Cl. N, Downgraded to C (sf); previously on Dec 9,
2010 Downgraded to Caa3 (sf)
Cl. O, Downgraded to C (sf); previously on Dec 9,
2010 Downgraded to Ca (sf)
Cl. X-1, Affirmed at Ba3 (sf); previously on
Feb 22, 2012 Downgraded to Ba3 (sf)
RATINGS RATIONALE
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. Based on our
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain their current ratings.
The downgrades are due to higher anticipated losses from specially serviced
and troubled loans.
Moody's rating action reflects a cumulative base expected loss of 4.1%
of the current balance compared to 2.9% at last review.
The difference is attributable to an increased number of loans in special
servicing and higher forecast losses from those loans. 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 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.
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 the slowdown
in growth in the current macroeconomic environment and commercial real
estate property markets. While commercial real estate property
values are beginning to move in a positive direction, a consistent
upward trend will not be evident until the volume of investment activity
increases, distressed properties are cleared from the pipeline,
and job creation rebounds. The hotel and multifamily sectors continue
to show positive signs and improvements in the office sector continue
with minimal additions to supply. However, office demand
is closely tied to employment, where unemployment remains above
long-term averages and business confidence remains below long-term
averages. Performance in the retail sector has been mixed with
lackluster holiday sales driven by sales and promotions. Consumer
confidence remains low. Across all property sectors, the
availability of debt capital continues to improve with increased securitization
activity of commercial real estate loans supported by a monetary policy
of low interest rates. Moody's central global macroeconomic scenario
reflects: an overall downward revision of real growth forecasts
since last quarter, amidst ongoing and policy-induced banking
sector deleveraging leading to a tightening of bank lending standards
and credit contraction; financial market turmoil continuing to negatively
impact consumer and business confidence; persistently high unemployment
levels; and weak housing markets resulting in a further slowdown
in growth.
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 Structured Finance Interest-Only
Securities" published in February 2012. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
Moody's review incorporated the use of the excel-based CMBS Conduit
Model v 2.61 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 pay down 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 underlying rating 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 underlying rating level, is
incorporated for loans with similar credit estimates in the same transaction.
The conduit model includes an IO calculator, which uses the following
inputs to calculate the proposed IO rating based on the published methodology:
original and current bond ratings and credit estimates; original
and current bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and the IO type corresponding
to an IO type as defined in the published methodology. The calculator
then returns a calculated IO rating based on both a target and mid-point.
For example, a target rating basis for a Baa3 (sf) rating is a 610
rating factor. The midpoint rating basis for a Baa3 (sf) rating
is 775 (i.e. the simple average of a Baa3 (sf) rating factor
of 610 and a Ba1 (sf) rating factor of 940). If the calculated
IO rating factor is 700, the CMBS IO calculator version 1.0
would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration
by the rating committee.
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 37,
down from 40 at last 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 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 June 23,
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 May 10, 2012 distribution date, the transaction's
aggregate certificate balance has decreased by 44% to $665.1
million from $1.2 billion at securitization. The
Certificates are collateralized by 101 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten loans, excluding defeasance, representing 30% of
the pool. Twenty-three loans, representing 26%
of the pool, have defeased and are secured by U.S.
government securities. There are no loans with investment grade
credit estimates.
There are 22 loans, representing 32% of the pool, that
are on the master servicer's watchlist compared to 23 loans, representing
23% of the pool, at last review. 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 since securitization resulting
in realized losses totaling $16.9 million (average loss
severity of 34%); the same as at last review. There
are currently five loans, representing 4% of the pool,
in special servicing compared to two loans, representing 1%
of the pool, at last review. Moody's has estimated
an aggregate $11.5 million loss (40% expected loss)
for the five specially serviced loans. At last review, the
total estimated loss for the two loans in special servicing was $5.2
million (53% expected loss on average).
Moody's has assumed a high default probability for seven poorly performing
loans representing 6% of the pool and has estimated a $7.2
million aggregate loss (18% expected loss based on a 50%
probability of default) from these troubled loans.
Moody's was provided with full year 2010 and partial year 2011 operating
results for 98% of the performing pool. Excluding specially
serviced and troubled loans, Moody's weighted average LTV is 86%
compared to 84% at last full review. Moody's net cash flow
reflects a weighted average haircut of 10.9% to the most
recently available net operating income. Moody's value reflects
a weighted average capitalization rate of 9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.32X and 1.26X, respectively,
compared to 1.38X and 1.29X, respectively, at
last full 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 top three performing loans represent 14.4% of the pool
balance. The largest loan is the 801 Market Street Loan ($38.1
million -- 5.7% of the pool), which
is secured by a 370,000 square foot (SF) office condominium situated
within a 1.0 million SF office building located in Philadelphia,
Pennsylvania. The condominium includes part of the basement,
ground floor retail and all of floors seven through 13. The office
building was built in 1928 and renovated in 2002. The building
is located in the Market Street East office market of Center City Philadelphia.
The property was 99% leased as of December 2011, the same
as last review. Leases representing close to 50% of the
net rentable area (NRA) expire before loan maturity. Moody's analysis
reflects a stressed cash flow to capture potential releasing risk.
Moody's LTV and stressed DSCR are 103% and 1.05X,
respectively, compared to 79% and 1.36X at last review.
The second largest loan is the Centennial Center I Loan ($36.2
million -- 5.4% of the pool), which
is secured by a 355,000 SF community shopping center located in
Las Vegas, Nevada. The collateral is anchored by The Home
Depot and Ross Stores and shadow-anchored by Wal-Mart and
Sam's Club. The property was 85% leased as of February 2012
compared to 84% leased at last review and 96% at securitization.
Financial and leasing performance has been steady for the past two years
following the departure of Circuit City in 2009. Moody's
LTV and stressed DSCR are 113% and 0.86X, respectively,
compared to 112% and 0.87X at last review.
The third largest loan is the Laguna Gateway Loan ($21.6
million -- 3.2% of the pool), which
is secured by a 270,500 SF retail center located in Elk Grove,
California. The collateral is anchored by T.J. Maxx,
Best Buy and Bed Bath & Beyond and shadow-anchored by The Home
Depot. The property was 97% leased as of December 2011,
essentially unchanged since last review. Numerous big box retailers
exercised renewal options since last review, reducing near-term
leasing risk. Moody's LTV and stressed DSCR are 75% and
1.33X, respectively, compared to 78% and 1.28X
at last review.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
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.
Gregory Reed
Vice President - Senior 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 Twelve Classes and Downgrades Four CMBS Classes of GECMC 2003-C1
