Approximately $757.7 Million of Structured Securities Affected
New York, February 24, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of three classes
and affirmed 14 classes of Greenwich Capital Commercial Funding Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2003-C1
as follows:
Cl. A-3, Affirmed at Aaa (sf); previously on
Jul 24, 2003 Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Jul 24, 2003 Assigned Aaa (sf)
Cl. XC, Affirmed at Aaa (sf); previously on Jul 24,
2003 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Nov 10,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Nov 10,
2006 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Nov 10,
2006 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Mar 18,
2010 Upgraded to Aaa (sf)
Cl. F, Affirmed at Aa1 (sf); previously on Mar 18,
2010 Upgraded to Aa1 (sf)
Cl. G, Affirmed at A1 (sf); previously on Sep 25,
2008 Upgraded to A1 (sf)
Cl. H, Affirmed at Baa1 (sf); previously on Nov 10,
2006 Upgraded to Baa1 (sf)
Cl. J, Affirmed at Baa3 (sf); previously on Jul 24,
2003 Definitive Rating Assigned Baa3 (sf)
Cl. K, Affirmed at Ba1 (sf); previously on Jul 24,
2003 Definitive Rating Assigned Ba1 (sf)
Cl. L, Affirmed at Ba2 (sf); previously on Jul 24,
2003 Definitive Rating Assigned Ba2 (sf)
Cl. M, Affirmed at B1 (sf); previously on Mar 18,
2010 Downgraded to B1 (sf)
Cl. N, Downgraded to Caa1 (sf); previously on Mar 18,
2010 Downgraded to B3 (sf)
Cl. O, Downgraded to Ca (sf); previously on Mar 18,
2010 Downgraded to Caa2 (sf)
Cl. P, Downgraded to C (sf); previously on Mar 18,
2010 Downgraded to Caa3 (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses resulting from realized
and anticipated losses from specially serviced and troubled loans.
The pool has experienced an aggregate $24.8 million loss
since last review.
The affirmations are due to key parameters, including Moody's
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.
Moody's rating action reflects a cumulative base expected loss of
2.8% of the current balance. At last review,
Moody's cumulative base expected loss was 4.3%.
Moody's stressed scenario loss is 7.8% 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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011 The hotel and multifamily sectors are continuing to show
signs of recovery, while recovery in the office and retail sectors
will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "Moody's Approach
to Rating Fusion Transactions" published on 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 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 credit estimate 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 25
compared to 27 at Moody's prior 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 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 March 18, 2010.
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 February 7, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 38% to $757.7
million from $1.2 billion at securitization. The
Certificates are collateralized by 59 mortgage loans ranging in size from
less than 1% to 7% of the pool, with the top ten loans
representing 36% of the pool.
Sixteen 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) 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.
Three loans have been liquidated from the pool, resulting in a realized
loss of $24.8 million (57% loss severity).
These losses have resulted in a 100% principal loss to Class Q
and an 8% principal loss to Class P. Four loans, representing
8% of the pool, are currently in special servicing.
The largest specially serviced loan is the Windsor Capital Portfolio Loan
($42.5 million -- 6.3% of the pool),
which represents a 50% pari passu interest in a $95.1
million A Note. The loan is secured by a portfolio of six full-service
Embassy Suite hotels totaling 1,394 rooms located in California.
The loan transferred to the special servicer due to maturity default.
The special servicer and borrower recently executed a modification to
the loan agreement extending the loan through September 2012 to provide
the borrower sufficient time to secure takeout financing. The loan
is expected to return back to the master servicer shortly. Moody's
is not estimating a loss from this loan.
The remaining three specially serviced loans are secured by a mix of multifamily,
office, and retail property types. Moody's estimates
an aggregate $6.8 million loss for these specially serviced
loans (overall 47% loss severity).
Moody's has assumed a high default probability for two poorly performing
loans representing 2% of the pool and has estimated an aggregate
$2.2 million loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 92%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 84% compared to 89%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 12.1% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.2%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.42X and 1.31X, respectively,
compared to 1.34X and 1.22X 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 16% of the pool
balance. The largest loan is the Oxmoor Center Mall Loan ($55.3
million -- 7.3% of the pool) which is secured by the
borrower's interest in a 929,000 square foot regional mall (517,000
square feet of collateral) located in Louisville, Kentucky.
The loan sponsor is an affiliate of General Growth Properties, Inc.
(GGP). The loan was transferred to special servicing in April 2009
due to GGP's Chapter 11 bankruptcy filing but was modified and transferred
back to the master servicer upon the resolution of the bankruptcy proceedings.
The center is anchored by Sears, Macy's and Von Maur. As
of December 2010, the mall and in-line space were 97%
and 89% leased, respectively, compared to 96%
and 89% at last review. Performance has improved since the
last review due to rent steps from the existing tenant base. Moody's
LTV and stressed DSCR for this loan are 68% and 1.47X,
respectively, compared to 77% and 1.30X at last review.
The second largest loan is the Tide Point Office Loan ($36.1
million -- 4.8% of the pool), which
is secured by a 397,000 square foot office building located in Baltimore,
Maryland. As of November 2010, the property was 82%
leased, compared to 99% at the last review. An additional
14% of the net rentable area (NRA) is expected to expire in 2011.
Given the drop in occupancy since the last review and our concerned about
the property's significant near-term lease expirations, Moody's
analysis reflects a downward cash flow adjustment to reflect a potential
decline in rental income. Moody's LTV and stressed DSCR are 98%
and 1.05X, respectively, compared to 92% and
1.11X at last review.
The third largest loan is the Frontier Building Office Loan ($30.6
million -- 4.0% of the pool), which is secured
by a 280,000 square foot office building located in Anchorage,
Alaska. As of May 2010, the property was 100% leased
compared to 92% at last review. Performance has improved
since last review. Moody's LTV and stressed DSCR are 60%
and 1.72X, respectively, compared to 74% and
1.39X 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
Amit Rustgi
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 Three and Affirms 14 CMBS Classes of GCCFC 2003-C1
