Approximately $751.8 Million of Structured Securities Affected
New York, December 09, 2010 -- Moody's Investors Service (Moody's) upgraded the rating of three classes,
affirmed seven classes, confirmed three classes and downgraded four
classes of GE Capital Commercial Mortgage Corporation, Commercial
Mortgage Pass-Through Certificates, Series 2003-C1
as follows:
Cl. A-3, Affirmed at Aaa (sf); previously on
Apr 15, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Apr 15, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Apr 15, 2003 Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Jun 29,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Oct 23,
2006 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Feb 19,
2008 Upgraded to Aaa (sf)
Cl. E, Upgraded to Aa1 (sf); previously on Feb 19,
2008 Upgraded to Aa2 (sf)
Cl. F, Upgraded to Aa2 (sf); previously on Feb 19,
2008 Upgraded to Aa3 (sf)
Cl. G, Upgraded to A1 (sf); previously on Feb 19,
2008 Upgraded to A2 (sf)
Cl. H, Confirmed at Baa1 (sf); previously on Oct 7,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. J, Confirmed at Ba1 (sf); previously on Oct 7,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. K, Confirmed at Ba2 (sf); previously on Oct 7,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to B3 (sf); previously on Oct 7,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to Caa1 (sf); previously on Oct 7,
2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. N, Downgraded to Caa3 (sf); previously on Oct 7,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. O, Downgraded to Ca (sf); previously on Oct 7,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. X-1, Affirmed at Aaa (sf); previously on
Apr 15, 2003 Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The upgrades are due to overall improved pool performance and a significant
increase in subordination levels since Moody's last review.
The downgrades are due to interest shortfalls and 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 affirmed classes are sufficient to maintain
their current ratings.
On October 7, 2010, Moody's placed seven classes on
review for possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
4.1% of the current balance. At last review,
Moody's cumulative base expected loss was 2.3%.
Moody's stressed scenario loss is 8.1% 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 Conduit 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
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 41
compared to 46 at last 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 February 19, 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 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 35% to $769.4
million from $1.2 billion at securitization. The
Certificates are collateralized by 106 mortgage loans ranging in size
from less than 1% to 5% of the pool, with the top
ten loans representing 31% of the pool. Thirty-nine
loans, representing 24% of the pool, have defeased
and are collateralized by U.S. Government securities.
There are no loans with investment grade credit estimates.
Nineteen loans, representing 15% 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.
Five loans have been liquidated from the pool since securitization,
resulting in a $4.7 million loss (13% loss severity
on average). Three loans, representing 3% of the pool,
are currently in special servicing. The master servicer has recognized
an aggregate appraisal reduction of $14.8 million for these
loans. Moody's has estimated an aggregate $15.3
million loss (61% expected loss on average) for all of the specially
serviced loans.
Moody's has assumed a high default probability for three poorly
performing loans representing 2% of the pool and has estimated
a $6 million loss (35% expected loss based on a 71%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 100%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 81% compared to 88%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 10.9% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.73X and 1.35X, respectively,
compared to 1.43X 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 13% of the pool
balance. The largest loan is the 801 Market Street Loan ($39.3
million -- 5.1% of the pool), which is secured
by a 370,000 square foot (SF) office condominium situated within
a one million SF office building located in Philadelphia, Pennsylvania.
The condominium includes part of the basement, ground floor retail
and all of floors seven through 13. The office building was built
in 1928 and renovated in 2002. The building is located in the Market
Street East office market of Center City Philadelphia. The property
was 100% leased as of June 2010 compared to 94% at last
review. This loan has amortized 5% since last review.
Moody's LTV and stressed DSCR are 82% and 1.32X,
respectively, compared to 118% and 0.91X at last review.
The second largest loan is the Centennial Center I Loan ($37.3
million -- 4.9% of the pool), which is secured
by a 355,000 SF community shopping center located in Las Vegas,
Nevada. Anchor tenants as part of the loan collateral include Home
Depot and Ross Stores while Wal-Mart and Sam's Club shadow
anchor the center and are excluded from the loan collateral. The
property's financial performance has improved since last review
due to an increase in revenue. Moody's LTV and stressed DSCR
are 91% and 1.07X, respectively, compared to
96% and 1.01X at last review.
The third largest loan is the Laguna Gateway Loan ($22.3
million -- 2.9% of the pool), which is secured
by a 270,500 SF retail center located in Elk Grove, California.
Property performance has declined since last review due to higher operating
expenses. The property was 98% leased as of June 2010 compared
to 96% in December 2008. Moody's LTV and stressed
DSCR are 79% and 1.26X, respectively, compared
to 70% and 1.43X 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
Keith Banhazl
Vice President - Senior Analyst
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 Upgrades Three, Affirms Seven, Confirms Three and Downgrades Four CMBS Classes of GECMC 2003-C1
