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Rating Action:

Moody's Upgrades Four Classes and Affirms Six CMBS Classes of GFCM 2003-1

20 Mar 2014

Approximately $227.1 Million of Structured Securities Affected

New York, March 20, 2014 -- Moody's Investors Service upgraded the ratings on four classes and affirmed the ratings on six classes in GFCM LLC, Mortgage Pass-Through Certificates, Series 2003-1 as follows:

Cl. A-4, Affirmed Aaa (sf); previously on Apr 11, 2013 Affirmed Aaa (sf)

Cl. A-5, Affirmed Aaa (sf); previously on Apr 11, 2013 Affirmed Aaa (sf)

Cl. B, Affirmed Aaa (sf); previously on Apr 11, 2013 Affirmed Aaa (sf)

Cl. C, Upgraded to Aaa (sf); previously on Apr 11, 2013 Affirmed Aa2 (sf)

Cl. D, Upgraded to A1 (sf); previously on Apr 11, 2013 Affirmed A3 (sf)

Cl. E, Upgraded to Baa1 (sf); previously on Apr 11, 2013 Affirmed Baa3 (sf)

Cl. F, Upgraded to Ba3 (sf); previously on Apr 11, 2013 Affirmed B1 (sf)

Cl. G, Affirmed Caa2 (sf); previously on Apr 11, 2013 Affirmed Caa2 (sf)

Cl. H, Affirmed C (sf); previously on Apr 11, 2013 Affirmed C (sf)

Cl. X, Affirmed Ba3 (sf); previously on Apr 11, 2013 Affirmed Ba3 (sf)

RATINGS RATIONALE

The ratings on four P&I classes were upgraded due to an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 14% since Moody's last review and 72% since securitization. The ratings on three investment grade P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on two below investment grade P&I classes were affirmed because their ratings are consistent with Moody's expected loss. The rating on the IO class was affirmed based on the credit performance (or the weighted average rating factor or WARF) of its referenced classes.

Moody's rating action reflects a base expected loss of 2.1% of the current balance, compared to 2.1% at Moody's last review. Moody's base expected loss plus realized losses is now 0.9% of the original pooled balance, compared to 1.0% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan-level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on 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, Moody's merges the credit enhancement for loans with investment-grade credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the credit assessment level) for loans with similar credit assessments in the same transaction.

Moody's uses a variation of Herf to measure the diversity of loan sizes, 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 34 compared to 37 at last review.

DEAL PERFORMANCE

As of the March 11, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 72% to $227.1 million from $822.6 million at securitization. The certificates are collateralized by 92 mortgage loans ranging in size from less than 1% to 10% of the pool.

Currently nineteen loans, constituting 19% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

Six loans have been liquidated from the pool resulting in an aggregate realized loss of $2.9 million or (10% average loan loss severity). There are no loans in special servicing.

Moody's has assumed a high default probability for three poorly performing loans representing 2% of the pool. Moody's has estimated a $783,400 aggregate loss for the troubled loans (15.0% expected loss overall).

Moody's received full year 2011 and 2012 operating results for 92% and 94% of the pool, respectively and partial year 2013 operating results for 19%. Moody's weighted average conduit LTV is 45%, compared to 51% at Moody's last review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 10.8% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.5%.

Moody's actual and stressed conduit DSCRs are 1.54X and 2.90X, respectively, compared to 1.47X and 2.59X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The top three performing conduit loans represent 22% of the pool balance. The largest conduit loan is the Gateway Plaza I & II Loan ($22.6 million -- 10% of the pool), which consists of two cross-collateralized and cross-defaulted loans secured by a 339,200 square foot (SF) power center located in Patchogue (Suffolk County), New York. The loan matures in April 2023 and amortizes on a 300-month schedule. The retail center is anchored by Bob's, Best Buy, Marshall's, and Home Goods. The property was 100% leased as of September 2013; the same as at last review. Moody's LTV and stressed DSCR are 46% and 2.19X, respectively, compared to 57% and 1.76X at last review.

The second largest conduit loan is the Maryland Industrial Office Portfolio Loan ($16.2 million -- 7% of the pool), which is secured by nine industrial properties and one office building located in Baltimore, Maryland. The portfolio totals 1.3 million SF and was 93% leased as of December 2012 compared to 80% leased at last review. The loan matures in February 2018 and fully amortizes on a 180-month schedule. Three of the properties are on the watchlist due to a decrease in occupancy. Moody's LTV and stressed DSCR are 32% and 3.77X, respectively, compared to 39% and 3.08X at last review.

The third largest loan is the Eastover Ridge Apartment & Brunswick Office Loan ($11.3 million -- 5% of the pool), which consists of two cross-collateralized and cross-defaulted loans secured by a 208-unit apartment complex (Eastover Ridge Apartments) and a 16,000 square feet medical office building (Brunswick Office) located in Charlotte, North Carolina. The loan matures in September 2027 and fully amortizes on a 300-month schedule. The loan is currently on the watchlist due to declining DSCR, a result of rental concessions offered since 2009. Moody's LTV and stressed DSCR are 81% and 1.27X, respectively, compared to 100% and 1.02X at last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

In rating this transaction, Moody's used a cash flow model to model cash flow stress scenarios to determine the extent to which investors would receive timely payments of interest and principal in the stress scenarios, given the transaction structure and collateral composition.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Gregory Reed
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Keith Banhazl
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Upgrades Four Classes and Affirms Six CMBS Classes of GFCM 2003-1
No Related Data.
© 2019 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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