Approximately $672.2 Million of Structured Securities Affected
New York, November 18, 2010 -- Moody's Investors Service (Moody's) upgraded the rating of one class,
downgraded five classes and affirmed eight classes of GE Capital Commercial
Mortgage Corporation, Commercial Mortgage Pass-Through Certificates,
Series 2001-2 as follows:
Cl. A-4, Affirmed at Aaa (sf); previously on
Aug 9, 2001 Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Aug 9, 2001 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Aug 2,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Aug 16,
2007 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Sep 25,
2008 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Oct 9,
2008 Upgraded to Aaa (sf)
Cl. F, Upgraded to Aa2 (sf); previously on Oct 9,
2008 Upgraded to Aa3 (sf)
Cl. G, Affirmed at A2 (sf); previously on Oct 9,
2008 Upgraded to A2 (sf)
Cl. H, Affirmed at Baa2 (sf); previously on Oct 9,
2008 Upgraded to Baa2 (sf)
Cl. I, Downgraded to B3 (sf); previously on Aug 9,
2001 Definitive Rating Assigned Ba2 (sf)
Cl. J, Downgraded to Caa2 (sf); previously on Aug 9,
2001 Definitive Rating Assigned Ba3 (sf)
Cl. K, Downgraded to Ca (sf); previously on Jun 15,
2005 Downgraded to B2 (sf)
Cl. L, Downgraded to C (sf); previously on Jun 15,
2005 Downgraded to Caa1 (sf)
Cl. M, Downgraded to C (sf); previously on Jun 15,
2005 Downgraded to Caa2 (sf)
The upgrade is due to the significant increase in subordination due to
loan payoffs and amortization and stable overall performance. The
pool has paid down by 13% since last review. In addition,
the pool benefits from 28% defeasance.
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans and concerns about loans approaching maturity in an adverse environment.
The entire pool has or will mature within the next twelve months.
Ten of the loans, representing 7% of the pool, have
a Moody's stressed debt service coverage ratio (DSCR) less than
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 current ratings.
Moody's rating action reflects a cumulative base expected loss of
4.5% of the current balance. At last review,
Moody's cumulative base expected loss was 2.7%.
Moody's stressed scenario loss is 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 this rating was "CMBS: Moody's
Approach to Rating Fusion Transactions" published on April 19,
2005. The 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 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 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 39
compared to 51 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 October 9, 2008. 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
As of the November 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 33% to $674.7
million from $1.00 billion at securitization. The
Certificates are collateralized by 101 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten loans representing 28% of the pool. The pool includes
two loans with investment grade credit estimates, representing 9%
of the pool. Twenty-six loans, representing 28%
of the pool, have defeased and are collateralized with U.S.
Twenty loans, representing 21% 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.
Six loans have been liquidated from the pool since securitization,
resulting in an aggregate $13.5 million loss (28%
loss severity on average). Currently, six loans, representing
4% of the pool, are in special servicing. The master
servicer has recognized an aggregate $10.3 million appraisal
reduction for all of the specially serviced loans. Moody's
has estimated an aggregate $14.9 million loss (64%
expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for nine poorly performing
loans representing 7% of the pool. Moody's has estimated
a $9.1 million loss (20% expected loss based on a
50% probability default) from the troubled loans.
Moody's was provided with full year 2009 operating results for 86%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 76%
compared to 86% at Moody's prior review. Moody's
net cash flow reflects a weighted average haircut of 11.4%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for the conduit component are 1.33X and 1.38X,
respectively, compared to 1.21X and 1.40X 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 largest loan with a credit estimate is the Holiday Inn -- 57th
Street Loan ($41.8 million -- 6.2% of
the pool), which is secured by a 596-room full service hotel
located in midtown Manhattan. Performance has declined since last
review due to a decline in tourist and business travel resulting from
the economic recession. The loan is currently on the watchlist
due to its decline in performance. Moody's credit estimate and
stressed DSCR are Baa3 and 1.79X, respectively, compared
to 38% and 3.00X at last review.
The second loan with an investment grade credit estimate is the Lake Buena
Vista Stores Loan ($15.9 million -- 2.4%
of the pool), which is secured by a 179,400 square foot factory
outlet center located in Orlando, Florida. The center was
100% leased as of January 2009, the same as at last review.
The largest tenants include Vanity Fair, Liz Claiborne and Reebok.
The loan has amortized approximately 6% since last review on a
25-year schedule. Moody's underlying rating and stressed
DSCR are A2 and 2.02X, respectively, compared to A3
and 1.77X at last review.
The top three performing conduit loans represent 10% of the pool.
The largest loan is the One Capital Loan ($24.9 million
-- 3.7% of the pool), which is secured by two
office buildings totaling 201,700 square feet located in downtown
Sacramento, California. The largest tenant is the California
Parks and Recreation which leases 32% of the net rentable area
(NRA) through April 2011. Moody's LTV and stressed DSCR are 80%
and 1.31X, respectively, compared to 94% and
1.12X at last review.
The second largest loan is the Meadowbrook Commons Loan ($18.9
million -- 3.3% of the pool), which
is secured by a 173,000 square foot anchored retail center located
in Freeport, New York. Anchors include Stop & Shop,
Toys'R'Us and Marshalls. Moody's LTV and stressed DSCR 80%
and 1.25X, respectively, compared to 88% and
1.14X at last review.
The third largest loan is the Dreamland Shopping Center & Lowe's Loan
($18.7 million -- 2.8% of the pool),
which is secured by a Lowe's Home Improvement store and an adjacent 126,800
square foot anchored retail center located in Asheville, North Carolina.
Moody's LTV and stressed DSCR 88% and 1.14X, respectively,
compared to 87% and 1.15X at last review.
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
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.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Upgrades One, Downgrades Five and Affirms Eight CMBS Classes of GECMC Series 2001-2
250 Greenwich Street
New York, NY 10007