Approximately $2.8 Billion of Structured Securities Affected
New York, January 13, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of 11 classes,
affirmed nine classes and confirmed one class of Greenwich Capital Commercial
Funding Corp., Commercial Mortgage Pass-Through Certificates,
Series 2005-GG3 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Feb 28, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Feb 28, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Feb 28, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Feb 28, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-1-A, Affirmed at Aaa (sf); previously
on Feb 28, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Confirmed at Aa2 (sf); previously on
Dec 9, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Dec 9,
2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa1 (sf); previously on Dec 9,
2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Baa3 (sf); previously on Dec 9,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Ba1 (sf); previously on Dec 9,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to Ba3 (sf); previously on Dec 9,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to B2 (sf); previously on Dec 9,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to B3 (sf); previously on Dec 9,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to Caa2 (sf); previously on Dec 9,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to Caa3 (sf); previously on Dec 9,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to C (sf); previously on Dec 9,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Dec 9,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Cl. N, Affirmed at C (sf); previously on Aug 27,
2009 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Aug 27,
2009 Downgraded to C (sf)
Cl. XP, Affirmed at Aaa (sf); previously on Feb 28,
2005 Definitive Rating Assigned Aaa (sf)
Cl. XC, Affirmed at Aaa (sf); previously on Feb 28,
2005 Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans and interest shortfalls.
The confirmation and 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.
On December 9, 2010 Moody's placed 12 classes on review for
possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
4.3% of the current balance. At last review,
Moody's cumulative base expected loss was 3.6%.
Moody's stressed scenario loss is 10.6% of the current
balance. 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.
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 current stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010
and 2011; we expect overall a sluggish recovery in most of the world's
largest economies, returning to trend growth rate with elevated
fiscal deficits and persistent unemployment levels.
The principal methodology used in rating GCCFC 2005-GG3 is "CMBS:
Moody's Approach to Rating Fusion Transactions", published
in April 2005.
In addition to methodologies and research available on moodys.com,
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.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 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 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 and B2, 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.
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 August 27, 2009. Please
see the ratings tab on the issuer / entity page on moodys.com for
the last rating action and the ratings history.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
DEAL PERFORMANCE
As of the December 13, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 21.1% to
$2.8 billion from $3.6 billion at securitization.
The Certificates are collateralized by 122 mortgage loans ranging in size
from less than 1% to 8% of the pool, with the top
ten loans representing 50.8% of the pool. The pool
contains one loan with an investment grade credit estimate that represents
7.5% of the pool. Nine loans, representing
4.3% of the pool, have defeased and are collateralized
with U.S. Government securities.
Twenty-five loans, representing 11.8% 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.
Five loans have been liquidated from the pool, resulting in an aggregate
realized loss of $23.9 million (48% loss severity
overall). At Moody's last review the pool had experienced an aggregate
loss of $1.8 million. Ten loans, representing
4.4% of the pool, are currently in special servicing.
Moody's has estimated an aggregate $55.7 million loss
(49.5% expected loss on average) for the specially serviced
loans.
Moody's has assumed a high default probability for two poorly performing
loans representing less than 1% of the pool and has estimated a
$2.9 million aggregate loss (25% expected loss based
on a 50% probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 89%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 96% compared to 94%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 12.4% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.49X and 1.11X, respectively,
compared to 1.58X and 1.12X 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
risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 26
compared to 30 at Moody's prior review.
The loan with a credit estimate is the Grand Canal Shoppes at the Venetian
Loan ($211.1 million -- 7.5%),
which represents a 55.5% participation interest in a first
mortgage secured by a 536,890 square foot mall located within the
Venetian Casino Resort in Las Vegas, Nevada. The mall shop
occupancy was 94% as of June 2010 compared to 99% at last
review. The loan sponsor is GGP. As a result of GGP's
emergence from bankruptcy, the loan was modified and is expected
to return to the master servicer. Performance has declined since
last review due to an increase in vacancy. Moody's current credit
estimate and stressed DSCR are Baa2 and 1.30X, respectively,
compared to A3 and 1.32X at last review.
The top three performing conduit loans represent 23.2% of
the pool balance. The largest loan is the North Star Mall Loan
($224.5 million -- 7.9%), which
is secured by a 493,706 square foot regional mall located in San
Antonio, TX. The property was 98% leased as of March
2010, essentially the same at last review. Moody's
LTV and stressed DSCR are 74% and 1.17X, respectively,
essentially the same as at last review.
The second largest loan is the 1440 Broadway Loan ($217.5
million - 7.7%), which is secured by a 741,915
square foot office building located in New York City. The property
was 99% leased as of June 2010 compared to 96% at last review.
Moody's LTV and stressed DSCR are 104% and 1.0X,
respectively, essentially the same as at last review.
The third largest loan is the Crescent Loan ($214.8 million
- 7.6%), which is secured by a 1.3 million
square foot office building located in Dallas, Texas. The
property was 94% leased as of December 2009, compared to
98% at last review. Moody's LTV and stressed DSCR
are 99.4% and 0.98X, respectively, compared
to 82.4% and 1.18X at last review.
REGULATORY DISCLOSURES
Information sources used to prepare the credit 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 Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Keith Banhazl
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Downgrades 11, Confirms One and Affirms Nine CMBS Classes of GCCFC 2005-GG3
