Approximately $1.072 Billion of Structured Securities Affected
New York, February 03, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of five classes
and affirmed 11 classes of Greenwich Capital Commercial Funding Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2003-C2
as follows:
Cl. A-3 Certificate, Affirmed at Aaa (sf); previously
on Jan 14, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-4 Certificate, Affirmed at Aaa (sf); previously
on Jan 14, 2004 Definitive Rating Assigned Aaa (sf)
Cl. XC Certificate, Affirmed at Aaa (sf); previously
on Jan 14, 2004 Definitive Rating Assigned Aaa (sf)
Cl. B Certificate, Affirmed at Aaa (sf); previously
on Aug 17, 2006 Upgraded to Aaa (sf)
Cl. C Certificate, Affirmed at Aaa (sf); previously
on Jul 23, 2007 Upgraded to Aaa (sf)
Cl. D Certificate, Affirmed at Aa1 (sf); previously
on Sep 25, 2008 Upgraded to Aa1 (sf)
Cl. E Certificate, Affirmed at Aa3 (sf); previously
on Jul 23, 2007 Upgraded to Aa3 (sf)
Cl. F Certificate, Affirmed at A2 (sf); previously on
Jul 23, 2007 Upgraded to A2 (sf)
Cl. G Certificate, Affirmed at Baa1 (sf); previously
on Jul 23, 2007 Upgraded to Baa1 (sf)
Cl. H Certificate, Affirmed at Baa3 (sf); previously
on Dec 3, 2009 Confirmed at Baa3 (sf)
Cl. J Certificate, Affirmed at Ba1 (sf); previously
on Dec 3, 2009 Confirmed at Ba1 (sf)
Cl. K Certificate, Downgraded to B1 (sf); previously
on Dec 3, 2009 Downgraded to Ba3 (sf)
Cl. L Certificate, Downgraded to B3 (sf); previously
on Dec 3, 2009 Downgraded to B2 (sf)
Cl. M Certificate, Downgraded to Caa2 (sf); previously
on Dec 3, 2009 Downgraded to Caa1 (sf)
Cl. N Certificate, Downgraded to Ca (sf); previously
on Dec 3, 2009 Downgraded to Caa3 (sf)
Cl. O Certificate, Downgraded to C (sf); previously
on Dec 3, 2009 Downgraded to Ca (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced loans.
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
the existing rating.
Moody's rating action reflects a cumulative base expected loss of
4.2% of the current balance. At last review,
Moody's cumulative base expected loss was 3.5%.
Moody's stressed scenario loss is 7.0% 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 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 methodologies used in this rating were "CMBS: Moody's
Approach to Conduit Transactions" published in September 2000 and "Moody's
Approach to Rating Large Loan/Single Borrower Transactions" published
in July 2000.
In addition to methodologies and research, 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 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 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
underlying ratings 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 underlying rating 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 17,
compared to 19 at Moody's prior 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 8.0 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.
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 December 3, 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 January 7, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 38% to $1.072
billion from $1.735 billion at securitization. The
Certificates are collateralized by 63 mortgage loans ranging in size from
less than 1% to 11% of the pool, with the top ten
loans representing 50% of the pool. There are no loans with
investment grade credit estimates. Twenty loans representing 23%
of the pool have defeased and are collateralized with U.S.
Government securities. Defeasance at last review represented 36%
of the pool.
Thirteen loans, representing 24% 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.
Four loans have been liquidated from the pool since securitization,
resulting in an aggregate $18.8 million loss (48%
loss severity on average). The pool had experienced an aggregate
$4.0 million loss at last review. Three loans,
representing 7% of the pool, are currently in special servicing.
The largest specially serviced loan is The Windsor Capital Portfolio Loan
($47.6 million -- 4.4% of the pool),
which represents a pari passu interest in a $95.2 million
first mortgage loan. The loan is secured by six full service hotel
properties located in California (5) and Michigan (1). The hotels
operate under the Embassy Suites, Marriot and Radisson. The
loan was transferred to special servicing in May 2010 due to imminent
maturity default. The borrower has been granted a loan modification
and extension and the loan is current. Moody's is not currently
estimating a loss on this loan at this time.
The remaining two specially serviced loans are secured by office properties.
Moody's has estimated an aggregate $16.5 million loss
(51% expected loss on average) for these two specially serviced
loans.
Moody's was provided with full year 2009 operating results for 99%
of the pool and partial year 2010 for 87% of the pool. Excluding
specially serviced and troubled loans, Moody's weighted average
LTV is 99% compared to 87% at last review. Moody's
net cash flow reflects a weighted average haircut of 18.8%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.44X and 1.11X, respectively,
compared to 1.64X and 1.26X 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 top three performing conduit loans represent 27% of the pool
balance. The largest loan is the U.S. Bank Tower
Loan ($120.2 million -- 11.1% of the
pool), which represents a pari passu interest in a $250 million
first mortgage loan. The loan is secured by a 1.4 million
square foot (SF) office tower and accompanying parking garage in downtown
Los Angeles, California. The loan sponsor is Maguire Properties
(Maguire). The property was 57% leased as of September 2010
compared to 88% at last review. The largest tenant at securitization,
Latham & Watkins (20% of the net rentable area (NRA)) vacated
the premises at its December 2009 lease expiration. Furthermore,
the lease for the second largest tenant, Sempra Energy (16%
of the NRA) expired in June 2010. Even with the substantial decline
in cash flow from the dramatic rise in vacancy, Moody's projects
that the property will still generate cash flow in excess of debt service.
However, given the softness in the Los Angeles office market,
it is anticipated that new tenants will be paying lower rents than those
currently in place. In addition, due to Maguire's current
financial issues, Moody's is concerned about the availability of
funds for leasing costs. The loan is interest-only for the
entire term. The loan is currently on the master servicer's watch
list for high vacancy. Moody's LTV and stressed DSCR are 130%
and 0.77X, respectively, compared to 103% and
1.01X, at last review.
The second largest loan is the Broadway Mall Loan ($88.0
million -- 8.1% of the pool), which is secured
by the borrower's interest in a 1.1 million SF regional mall
located 27 miles east of New York City in Hicksville (Nassau County),
New York. The property was 79% leased as of October 2010,
the same as last review. The center is anchored by Macy's,
IKEA and Target. Performance has been stable. Moody's LTV
and stressed DSCR are 91% and 1.10X, respectively,
compared 103% and 0.97X at last review.
The third largest loan is the Pinnacle Building Loan ($86.1
million -- 8.0% of the pool), which is secured
by a 393,000 SF Class A office building located in Burbank,
California. The property was 98% leased as of September
2010, the same as last review. The largest tenant is Warner
Music Group, which leases 50% of the premises through December
2019. The loan is interest-only for the entire term.
Moody's LTV and stressed DSCR are 80% and 1.25X respectively,
compared to 75% and 1.33X 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
Lacey Morgan
Associate 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 Five and Affirms 11 CMBS Classes of GCCFC 2003-C2
