Approximately $907.1 Million of Structured Securities Affected
New York, July 29, 2010 -- Moody's Investors Service (Moody's) confirmed the rating of two classes,
affirmed three classes and downgraded eight classes of GE Capital Commercial
Mortgage Corp., Commercial Mortgage Pass-Through Certificates,
2001-1. The downgrades are due to higher expected losses
for the pool resulting from realized and anticipated losses from specially
serviced and watchlisted loans and concerns about loans approaching maturity
in an adverse environment. Twenty-four loans, representing
20% of the pool, mature within the next 12 months and have
a Moody's stressed debt service coverage ratio (DSCR) less than
The confirmations and the affirmations are due to key rating parameters,
including Moody's loan to value (LTV) ratio, stressed DSCR and the
Herfindahl Index (Herf), remaining within acceptable ranges.
On July 14, 2010, Moody's placed ten classes on review
for possible downgrade. This action concludes the review of the
transaction. The rating action is the result of Moody's on-going
surveillance of commercial mortgage backed securities (CMBS) transactions.
As of the July 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 20% to $907.1
million from $1.1 billion at securitization. The
Certificates are collateralized by 135 mortgage loans ranging in size
from less than 1% to 5% of the pool, with the top
ten loans representing 25% of the pool. Currently,
there is one loan, representing 5% of the pool, with
an investment grade underlying rating. Forty-eight loans,
representing 40% of the pool, have defeased and are secured
by U.S. Government securities.
Twenty seven loans, representing 19% 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; 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.
Eight loans have been liquidated from the pool, resulting in an
aggregate realized loss of $21.5 million (42% loss
severity on average). There are 15 loans, representing 11%
of the pool, currently in special servicing. The largest
specially serviced loan is the Hawthorn Suites Loan ($15.3
million -- 1.7% of the pool), which is secured
by a 280-room extended stay hotel located in Atlanta, Georgia.
The loan was transferred to special servicing in April 2009 due to delinquency
and is currently 90+ days delinquent. The master servicer
has recognized a $6.7 million appraisal reduction for this
loan. The remaining 14 specially serviced loans are secured by
a mix of property types. The servicer has recognized a cumulative
$25.3 million appraisal reduction for the ten of the 15
specially serviced loans. Moody's estimates an aggregate
$40.8 million loss (43% loss severity on average)
for 12 of the specially serviced loans.
In addition to recognizing losses from specially serviced loans,
Moody's has assumed a high default probability on 13 poorly performing
loans, representing 11% of the pool, due to refinancing
risk. Moody's estimates a $27.1 million aggregate
loss for these troubled loans (27% expected loss on average based
on an overall 42% loss given default and an overall 64%
probability of default). Moody's rating action recognizes
potential uncertainty around the timing and magnitude of loss from these
Moody's was provided with full-year 2008 and full-year 2009
operating results for 89% and 74%, respectively,
of the pool. Moody's weighted average LTV ratio, excluding
the specially serviced and troubled loans, is 72% compared
to 85% at last review.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCR are 1.40X and 1.55X, respectively,
compared to 1.29X and 1.33X 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 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
the risk of multiple-notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 41
compared to 67 at last review.
The loan with an underlying rating is the 59 Maiden Lane Loan ($44.3
million - 5% of the pool), which is secured by a 1.1
million square foot Class B office building located in the financial district
of New York City. As of October 2009, the building was 98%
leased, essentially the same since last review. The major
tenant is NY Citywide Department of Administrative Services, which
occupies 66% of the net rentable area (NRA) through August 2021.
Performance remains stable and in-line with last review.
The loan matures in April 2011 and has amortized 5% since last
review. Moody's underlying rating and stressed DSCR are Aaa and
3.91X, respectively, compared to Aaa and 3.73X
at last review.
The top three conduit loans represent 9% of the outstanding pool
balance. The largest conduit loan is the Long Wharf Maritime Center
I Loan ($33.3 million - 4% of the pool),
which is secured by a 416,000 square foot office building located
in the harbor area immediately south of downtown New Haven, Connecticut.
As of March 2009, the property was 60% leased compared to
97.0% at last review. The property's largest
tenant is AT&T Corp. (AT&T; Moody's senior unsecured
rating A2 - negative outlook). AT&T downsized to 20%
of the NRA from 49% NRA when it renewed its lease in October 2008.
The loan is on the watch-list for low DSCR and it matures March
2011. Moody's LTV and stressed DSCR are 152% and 0.68X,
compared to 88% and 1.16X, respectively, at
The second largest conduit loan is the Pescadero Apartments Loan ($26
million - 3% of the pool), which is secured by a 170-unit
Class A apartment complex located 26 miles southeast of San Francisco
in Redwood City, California. As of June 2010, the property
was 89% leased compared to 95% at last review. Financial
performance has suffered due to soft market conditions, increased
competition and increased operating expenses. The loan is on the
master servicer's watchlist due to low debt service coverage. The
loan matures in March 2011. Moody's LTV and stressed DSCR
are 125% and 0.78X, respectively, compared to
116% and 0.84X, respectively, at last review.
The third largest conduit loan is the Information Resources Loan ($21.5
million - 2% of the pool), which is secured by two
Class B office buildings with a total of 252,000 square feet located
in the West Loop submarket of Chicago, Illinois. The properties
were constructed in 1908 and are 100% leased to Information Resources
Inc. through October 2013. The loan is on the watchlist
for a technical default related to the tenant improvement and leasing
commission reserve. Moody's LTV and stressed DSCR are 63%
and 1.72X, respectively, compared to 60% and
1.71X, respectively, at last review.
Moody's rating action is as follows:
-Class A-2, $674,543,993,
affirmed at Aaa; previously assigned Aaa on 7/17/2001
-Class X-1, Notional, affirmed at Aaa;
previously assigned Aaa on 7/17/2001
-Class B, $45,157,000, affirmed
at Aaa; previously upgraded to Aaa from Aa2 on 4/7/2005
-Class C, $49,390,000, confirmed
at Aaa; previously placed on review for possible downgrade on 7/14/2010
-Class D, $15,523,000, confirmed
at Aa1; previously placed on review for possible downgrade on 7/14/2010
-Class E, $15,522,000, downgraded
to A1 from Aa3; previously placed on review for possible downgrade
-Class F, $15,523,000, downgraded
to Baa1 from A2; previously placed on review for on 7/14/2010
-Class G, $14,112,000, downgraded
to Ba3 from Baa2; previously placed on review for possible downgrade
-Class H, $25,400,000, downgraded
to Caa2 from Ba1; previously placed on review for possible downgrade
-Class I, $18,345,000, downgraded
to Caa3 from Ba2; previously placed on review for possible downgrade
-Class J, $9,878,000, downgraded
to Ca from Ba3; previously placed on review for possible downgrade
-Class K, $9,878,000, downgraded
to C from B3; previously placed on review for possible downgrade
-Class L, $13,823,944, downgraded
to C from Caa2; previously placed on review for possible downgrade
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 September 20, 2007.
The principal methodology used in rating and monitoring this transaction
is "CMBS: Moody's Approach to Rating Fusion Transactions"
published on April 19, 2005, which can be found at www.moodys.com
in the Ratings Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this transaction 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.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
Moody's Confirms Two, Affirms Three and Downgrades Eight CMBS Classes of GE 2001-1