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Rating Action:

Moody's Downgrades Ten, Confirms Four and Affirms 13 CMBS Classes of GECMC 2007-C1

02 Dec 2010

Approximately $3.7 Billion of Structured Securities Affected

New York, December 02, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of ten classes, confirmed four classes and affirmed 13 classes of GE Capital Commercial Mortgage Corporation Commercial Mortgage Pass-Through Certificates, Series 2007-C1 as follows:

Cl. A-1, Affirmed at Aaa (sf); previously on May 9, 2007 Definitive Rating Assigned Aaa (sf)

Cl. A-2, Affirmed at Aaa (sf); previously on May 9, 2007 Definitive Rating Assigned Aaa (sf)

Cl. A-3, Affirmed at Aaa (sf); previously on May 9, 2007 Definitive Rating Assigned Aaa (sf)

Cl. X-C, Affirmed at Aaa (sf); previously on May 9, 2007 Definitive Rating Assigned Aaa (sf)

Cl. X-P, Affirmed at Aaa (sf); previously on May 9, 2007 Definitive Rating Assigned Aaa (sf)

Cl. A-AB, Affirmed at Aaa (sf); previously on May 9, 2007 Definitive Rating Assigned Aaa (sf)

Cl. A-4, Confirmed at Aaa (sf); previously on Oct 7, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-1A, Confirmed at Aaa (sf); previously on Oct 7, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Cl. A-M, Confirmed at Aa3 (sf); previously on Oct 7, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. A-MFL, Confirmed at Aa3 (sf); previously on Oct 7, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

Cl. A-J, Downgraded to B3 (sf); previously on Oct 7, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade

Cl. A-JFL, Downgraded to B3 (sf); previously on Oct 7, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade

Cl. B, Downgraded to Caa2 (sf); previously on Oct 7, 2010 B2 (sf) Placed Under Review for Possible Downgrade

Cl. C, Downgraded to Caa3 (sf); previously on Oct 7, 2010 B3 (sf) Placed Under Review for Possible Downgrade

Cl. D, Downgraded to Ca (sf); previously on Oct 7, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade

Cl. E, Downgraded to Ca (sf); previously on Oct 7, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade

Cl. F, Downgraded to C (sf); previously on Oct 7, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Cl. G, Downgraded to C (sf); previously on Oct 7, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Cl. H, Downgraded to C (sf); previously on Oct 7, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Cl. J, Downgraded to C (sf); previously on Oct 7, 2010 Ca (sf) Placed Under Review for Possible Downgrade

Cl. K, Affirmed at C (sf); previously on Dec 3, 2009 Downgraded to C (sf)

Cl. L, Affirmed at C (sf); previously on Dec 3, 2009 Downgraded to C (sf)

Cl. M, Affirmed at C (sf); previously on Dec 3, 2009 Downgraded to C (sf)

Cl. N, Affirmed at C (sf); previously on Dec 3, 2009 Downgraded to C (sf)

Cl. O, Affirmed at C (sf); previously on Dec 3, 2009 Downgraded to C (sf)

Cl. P, Affirmed at C (sf); previously on Dec 3, 2009 Downgraded to C (sf)

Cl. Q, Affirmed at C (sf); previously on Dec 3, 2009 Downgraded to C (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. The confirmations 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 confirmed and affirmed classes are sufficient to maintain their current ratings.

On October 7, 2010, Moody's placed 14 classes on watch for possible downgrade. This action concludes our review.

Moody's rating action reflects a cumulative base expected loss of 12.2% of the current balance. Moody's stressed scenario loss is 24.6% 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 these ratings was "CMBS: Moody's Approach to Rating U.S. Conduit Transactions" published in September 2000. This methodology is available on Moody's website at www.moodys.com.

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 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 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 received and took into account one or more third-party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the ratings.

DEAL PERFORMANCE

As of the November 10, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 7% to $3.69 billion from $3.95 billion at securitization. The Certificates are collateralized by 189 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 46% of the pool. No loans have defeased and there are no loans with credit estimates.

Thirty-five loans, representing 17% 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.

Nine loans have been liquidated from the pool, resulting in an aggregate realized loss of $33.9 million (17% loss severity overall). Thirty-five loans, representing 28% of the pool, are currently in special servicing. The largest specially serviced loan is the 666 Fifth Avenue Loan ($249 million -- 6.7% of the pool), which is secured by a 1.5 million square foot Class A office building located in New York, New York. This loan represents a 21% pari-passu interest in a $1.215 billion first mortgage loan. The loan was transferred to special servicing in March 2010 when the borrower requested a modification. The loan remains current. The second largest specially serviced loan is the Manhattan Apartment Portfolio Loan ($192.1 million -- 5.2% of the pool), which is secured by a portfolio of 36 cross-collateralized and cross-defaulted multi-family properties located in Manhattan. The loan was transferred to special servicing on February 27, 2009 due to imminent default and is currently 90+ days delinquent.

The remaining specially serviced loans are represented by a mix of property types. The servicer has recognized appraisal reductions totaling $179.5 million for 22 of the specially serviced loans. Moody's has estimated an aggregate $294.8 million loss (30% expected loss on average) for 26 of the specially serviced loans.

Moody's has assumed a high default probability for 14 poorly performing loans representing 7% of the pool and has estimated a $70.5 million loss (26% expected loss based on a 51% probability default) from these troubled loans. Moody's rating action recognizes potential uncertainty around the timing and magnitude of loss from these troubled loans.

Moody's was provided with full year 2009 operating results for 93% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 114% compared to 136% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 10.7% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.1%.

Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.38X and 0.90X, respectively, compared to 1.16X and 0.79X 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 31 compared to 39 at Moody's prior review.

The top three performing loans represent 17% of the pool balance. The largest loan is the Wolfchase Galleria Loan ($225 million - 6.1% of the pool), which is secured by the borrower's interest in a 1.3 million square foot enclosed regional mall located in Memphis, Tennessee. The mall is anchored by Macy's, Dillard's, Sears and J.C. Penney, none of which are part of the loan collateral. The property was 89% leased as of June 2010 versus 90% at last review. The loan sponsor is Simon Property Group, Inc. Moody's LTV and stressed DSCR are 137% and 0.67X, respectively, compared to 134% and 0.67X at last review.

The second largest loan is the Skyline Portfolio Loan ($203.4 million -- 5.5% of the pool), which is secured by a portfolio of eight cross-collateralized and cross-defaulted office buildings located in Falls Church, Virginia. This loan represents a 30% pari-passu interest in a $678 million first mortgage loan. The properties were 95% leased as of December 2009 compared to 97% as of December 2008. Despite the decline in occupancy, performance has improved since last review. The loan sponsor is Vornado Realty Trust. Moody's LTV and stressed DSCR are 121% and 0.78X, respectively, compared to 134% and 0.72X at last review.

The third largest loan is the JP Morgan Portfolio Loan ($196.5 million -- 5.4% of the pool), which is secured by a 732,922 square foot office building and a 1,900 space parking garage located in Phoenix, Arizona and a 429,000 square foot office building located in Houston, Texas. Performance has been stable. The property is 100% leased to JP Morgan through March 31, 2021. The loan is interest-only throughout the term. Moody's LTV and stressed DSCR are 111% and 0.85X, respectively, compared to 161% and 0.61X 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 purposes 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
Gregory Reed
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.

Moody's Downgrades Ten, Confirms Four and Affirms 13 CMBS Classes of GECMC 2007-C1
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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