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Rating Action:

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

Global Credit Research - 18 Jan 2017

Approximately $129 Million of Structured Securities Affected

New York, January 18, 2017 -- Moody's Investors Service has upgraded the ratings on three classes and affirmed the ratings on six classes in GFCM LLC, Mortgage Pass-Through Certificates, Series 2003-1 as follows:

Cl. A-5, Affirmed Aaa (sf); previously on Mar 3, 2016 Affirmed Aaa (sf)

Cl. B, Affirmed Aaa (sf); previously on Mar 3, 2016 Affirmed Aaa (sf)

Cl. C, Affirmed Aaa (sf); previously on Mar 3, 2016 Affirmed Aaa (sf)

Cl. D, Upgraded to Aaa (sf); previously on Mar 3, 2016 Affirmed Aa2 (sf)

Cl. E, Upgraded to A1 (sf); previously on Mar 3, 2016 Affirmed A3 (sf)

Cl. F, Upgraded to Ba2 (sf); previously on Mar 3, 2016 Affirmed Ba3 (sf)

Cl. G, Affirmed Caa2 (sf); previously on Mar 3, 2016 Affirmed Caa2 (sf)

Cl. H, Affirmed C (sf); previously on Mar 3, 2016 Affirmed C (sf)

Cl. X, Affirmed Ba3 (sf); previously on Mar 3, 2016 Affirmed Ba3 (sf)

RATINGS RATIONALE

The ratings on Classes D, E and F were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 18% since Moody's last review.

The ratings on Classes A-5, B, and C 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 the Classes G and H were affirmed because the ratings are consistent with Moody's expected loss.

The rating on the IO class, Class X, 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 1.5% of the current balance, compared to 1.8% at Moody's last review. Moody's base expected loss plus realized losses is now 0.6% of the original pooled balance, compared to 0.7% 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://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

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

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 these ratings was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in December 2014. Please see the Rating Methodologies 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, which it uses for both conduit and fusion transactions. Credit enhancement levels for conduit loans 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). Moody's fuses the conduit results with the results of its analysis of investment grade structured credit assessed loans and any conduit loan that represents 10% or greater of the current pool balance.

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 21, compared to 25 at Moody's last review.

DEAL PERFORMANCE

As of the January 12, 2017 distribution date, the transaction's aggregate certificate balance has decreased by 84% to $129 million from $823 million at securitization. The certificates are collateralized by 59 mortgage loans ranging in size from less than 1% to 15% of the pool, with the top ten loans (excluding defeasance) constituting 54% of the pool.

Twelve loans, constituting 17% 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 (for an average loss severity of 9.5%). There are currently no loans in special servicing.

Moody's received full year 2015 operating results for 100% of the pool. Moody's weighted average conduit LTV is 42%, compared to 41% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12.5% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.7%.

Moody's actual and stressed conduit DSCRs are 1.94X and 4.07X, respectively, compared to 1.61X and 3.51X 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 conduit loans represent 28% of the pool balance. The largest loan is the Gateway Plaza I & II Loan ($19.5 million -- 15% of the pool), which consists of two cross-collateralized and cross-defaulted loans secured by a 339,310 square foot (SF) power center located in Patchogue (Suffolk County), New York. Major tenants include Bob's Furniture Store, Best Buy and Marshall's. Additionally, Dick's Sporting Goods recently replaced a former supermarket tenant (representing 15% of the net rentable area) that vacated in 2014. The property was 100% leased as of December 2015, compared to 81% leased as of February 2014. The loan benefits from amortization and has amortized 36% since securitization. Moody's LTV and stressed DSCR are 48% and 2.09X, respectively, compared to 52% and 1.91X at the last review.

The second largest exposure is the Eastover Ridge Apartments and Brunswick Avenue Medical Office Loans ($9.7 million -- 7.5% of the pool), which is consists of two cross-collateralized and cross-defaulted loans. The loans are secured by a 208-unit apartment complex (Eastover Ridge Apartments) and a 16,000 SF medical office building (Brunswick Office) located in Charlotte, North Carolina. The loan is fully amortizing and has amortized 37% since securitization. Moody's LTV and stressed DSCR are 70% and 1.48X respectively, compared to 71% and 1.45X at the last review.

The third largest loan is the Windhaven Plaza Retail Loan ($6.8 million -- 5.2% of the pool), which is secured by an anchored retail center located at the northwest corner of Dallas North Tollway & Parker Road in the West Plano market in Plano, Texas. The property was 95% leased as of December 2015, compared to 94% as of December 2014 and 100% in December 2013. The loan is fully amortizing and has amortized 41% since securitization. Moody's LTV and stressed DSCR are 37% and 2.81X, respectively, compared to 44% and 2.32X at the 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.

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.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Kevin Li
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

Matthew Halpern
Asst Vice President - Analyst
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

No Related Data.
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