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Rating Action:

Moody's Upgrades Two, Affirms Four and Downgrades One Class of GMAC 2004-C2

24 Jul 2014

Approximately $153 Million of Structured Securities Affected

New York, July 24, 2014 -- Moody's Investors Service has upgraded the ratings on two classes, affirmed the ratings on four classes and downgraded the rating on one class in GMAC Commercial Mortgage Securities, Inc., Series 2004-C2 as follows:

Cl. A-1A, Upgraded to Aa2 (sf); previously on Sep 19, 2013 Affirmed Aa3 (sf)

Cl. A-4, Upgraded to Aa2 (sf); previously on Sep 19, 2013 Affirmed Aa3 (sf)

Cl. B, Affirmed Ba1 (sf); previously on Sep 19, 2013 Affirmed Ba1 (sf)

Cl. C, Affirmed B1 (sf); previously on Sep 19, 2013 Affirmed B1 (sf)

Cl. D, Affirmed Caa3 (sf); previously on Sep 19, 2013 Affirmed Caa3 (sf)

Cl. E, Affirmed C (sf); previously on Sep 19, 2013 Affirmed C (sf)

Cl. X-1, Downgraded to Caa1 (sf); previously on Sep 19, 2013 Affirmed Ba3 (sf)

RATINGS RATIONALE

The ratings on P&I classes A-1A and A-4 were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization.

The deal has paid down 73% since Moody's last review. The ratings on P&I classes 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 P&I classes D and E were affirmed because the ratings are consistent with Moody's expected loss.

The rating on the IO Class (Class X-1) was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes.

Moody's rating action reflects a base expected loss of 11.9% of the current balance compared to 4.3% at Moody's last review. Moody's base expected loss plus realized losses is now 11.0% of the original pooled balance compared to 12.0% 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://www.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 methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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 structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured 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 four compared to 12 at Moody's last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

DEAL PERFORMANCE

As of the July 10, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 84% to $153 million from $934 million at securitization. The certificates are collateralized by 21 mortgage loans ranging in size from less than 1% to 34% of the pool, with the top ten non-defeased loans constituting 80% of the pool. Two loans, constituting 20% of the pool, have defeased and are secured by US government securities.

Fourteen loans, constituting 29% 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.

Eleven loans have been liquidated from the pool, resulting in an aggregate realized loss of $84 million (for an average loss severity of 56%). Three loans, constituting 40% of the pool, are currently in special servicing. The largest specially serviced loan is the Military Circle Mall loan ($52 million -- 34% of the pool), which is secured by a regional mall located in Norfolk, Virgina and anchored by Macy's, JC Penny's and Sears. The loan transferred to special servicing in August 2013 due to imminent default. Current occupancy is 67% compared to 70% at prior review. The borrower is currently in negotiations with the special servicer regarding potential resolutions.

The remaining two specially serviced loans are secured by an industrial and office property. Moody's estimates an aggregate $17.1 million loss for the specially serviced loans (30% expected loss on average).

Moody's received full year 2012 and full or partial year 2013 operating results for 94% of the pool. Moody's weighted average conduit LTV is 78%, compared to 80% 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 12.3% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.1%.

Moody's actual and stressed conduit DSCRs are 1.37X and 1.34X, respectively, compared to 1.38X and 1.31X 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 25% of the pool balance. The largest loan is the Escondido Village Shopping Center Loan ($16 million -- 11% of the pool), which is secured by an anchored retail center located 31 miles from San Diego. Current occupancy is 94% compared to 89% at prior review. The loan is expected to payoff August 1, 2014. Moody's LTV and stressed DSCR are 87% and 1.16X, respectively, compared to 91% and 1.10X at the last review.

The second largest loan is the DDC Portfolio Rollup Loan ($12 million -- 8% of the pool), which is secured by a portfolio of six retail, office and mixed-use properties located in Washington, DC. At yearend 2013, the occupancy was 94%. The servicer expects the loan to payoff August 5, 2014. Moody's LTV and stressed DSCR are 60% and 1.73X, respectively, compared to 60% and 1.70X at the last review.

The third largest loan is the Diamondhead Building Loan ($10 million -- 6.6% of the pool), which is secured by an office building in suburban New Jersey. Per the borrower, the refinance is in process. Current occupancy is 93%, the same as at prior review. Moody's LTV and stressed DSCR are 71% and 1.45X, respectively, compared to 85% and 1.21X 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.

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.

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.

Sini Gomes
Associate 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
Senior Vice President
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 Two, Affirms Four and Downgrades One Class of GMAC 2004-C2
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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