Approximately $591.7 million of Structured Securities Affected
New York, January 13, 2011 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes,
downgraded three classes and affirmed nine classes of GE Capital Commercial
Mortgage Corporation Commercial Mortgage Pass-Through Certificates,
series 2001-1 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Jul 17, 2001 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Jul 17, 2001 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Apr 7,
2005 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Jul 29,
2010 Confirmed at Aaa (sf)
Cl. D, Upgraded to Aaa (sf); previously on Jul 29,
2010 Confirmed at Aa1 (sf)
Cl. E, Upgraded to Aa3 (sf); previously on Jul 29,
2010 Downgraded to A1 (sf)
Cl. F, Affirmed at Baa1 (sf); previously on Jul 29,
2010 Downgraded to Baa1 (sf)
Cl. G, Affirmed at Ba3 (sf); previously on Jul 29,
2010 Downgraded to Ba3 (sf)
Cl. H, Downgraded to Caa3 (sf); previously on Jul 29,
2010 Downgraded to Caa2 (sf)
Cl. I, Downgraded to C (sf); previously on Jul 29,
2010 Downgraded to Caa3 (sf)
Cl. J, Downgraded to C (sf); previously on Jul 29,
2010 Downgraded to Ca (sf)
Cl. K, Affirmed at C (sf); previously on Jul 29,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Jul 29,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Jul 14,
2010 Downgraded to C (sf)
RATINGS RATIONALE
The upgrades are due to the significant increase in subordination due
to loan payoffs and amortization and overall stable pool performance.
The pool has paid down by 35% since Moody's last review.
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans.
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
their current ratings.
Moody's rating action reflects a cumulative base expected loss of
10% of the current balance. At last review, Moody's
cumulative base expected loss was 8%. Moody's stressed
scenario loss is 11.5% 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
2005.
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 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 June 29th, 2010. 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
six months.
DEAL PERFORMANCE
As of the May 2, 2001 distribution date, the transaction's
aggregate certificate balance has decreased by 48% to $592
million from $1.2 billion at securitization. The
Certificates are collateralized by 88 mortgage loans ranging in size from
less than 1% to 7% of the pool, with the top ten loans
representing 27% of the pool. The pool contains one loan
with an investment grade credit estimate, representing 7%
of the pool. Twenty-one loans, representing 32%
of the pool, have defeased and are collateralized with U.S.
Government securities. Defeasance at last review represented 40%
of the pool.
Forty-one loans, representing 35% 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.
Four loans have been liquidated from the pool, resulting in an aggregate
realized loss of $19.9 million (44% loss severity
overall). Fifteen loans, representing 17% of the pool,
are currently in special servicing. The servicer has recognized
appraisal reductions totaling $25.7 million for nine of
the specially serviced loans. Moody's has estimated an aggregate
$50.2 million loss (50% expected loss on average)
for all of the specially serviced loans.
Moody's has assumed a high default probability for seven poorly
performing loans representing 5% of the pool and has estimated
a $5 million aggregate loss (20% expected loss based on
a 50% probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 72%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 108% compared to 101%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 10% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.40X and 1.55X, respectively,
which is similar to 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.
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 30
compared to 37 at Moody's prior review.
The loan with a credit estimate is the 59 Maiden Lane Loan ($44
million -- 7.4%), which is secured by 1.13
million square foot office building located in lower Manhattan.
Performance has been strong since securitization and the loan benefits
from amortization. The loan matures in April 2011. The property
is 100% leased, the same as at last review. Moody's
current credit estimate and stressed DSCR are Aaa and 4.17X,
respectively, compared to Aaa and 3.95X at last review.
The top three performing conduit loans represent 10% of the pool
balance. The largest loan is the Pescadero Apartments Loan ($26
million -- 4.4%), which is secured by a 170 unit
multifamily property located in Redwood City, California.
The property was 97% leased as of August 2010, which is similar
to last review. Moody's LTV and stressed DSCR are 124%
and .79X, respectively, essentially the same as at
last review.
The second largest loan is the Information Resources Loan ($21
million - 3.6%), which is secured by a two
Class B loft type offices totaling 252,000 square feet and located
in the West Loop submarket of Chicago. The property was 100%
leased as of June 2010, similar to last review. Moody's
LTV and stressed DSCR are 56% and 1.93X, respectively,
compared to 63% and 1.72X at last review.
The third largest loan is the Juncos Plaza Loan ($14.6 million
- 2.5%), which is secured by a 213,000
square foot retail property in Juncos, Puerto Rico. The property
was 82% leased as of September 2009. Moody's LTV and
stressed DSCR are 79% and 1.33X, respectively,
compared to 86% and 1.32X 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 purpose 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
Keith Banhazl
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
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 Two, Downgrades Three and Affirms Nine CMBS Classes of GECMC 2001-1
