Approximately $240.7 Million of Structured Securities Affected
New York, February 16, 2011 -- Moody's Investors Service (Moody's) upgraded the rating of two classes,
downgraded two classes and affirmed seven classes of Greenwich Capital
Commercial Funding Corp., Commercial Mortgage Pass-Through
Certificates, Series 2004-GG1 as follows:
Cl. D, Upgraded to Aa2 (sf); previously on Jul 9,
2009 Upgraded to Aa3 (sf)
Cl. E, Upgraded to A1 (sf); previously on Jul 9,
2009 Upgraded to A2 (sf)
Cl. F, Affirmed at Baa1 (sf); previously on Jun 24,
2004 Definitive Rating Assigned Baa1 (sf)
Cl. G, Affirmed at Baa2 (sf); previously on Jun 24,
2004 Definitive Rating Assigned Baa2 (sf)
Cl. H, Affirmed at Baa3 (sf); previously on Jun 24,
2004 Definitive Rating Assigned Baa3 (sf)
Cl. J, Affirmed at Ba1 (sf); previously on Jun 24,
2004 Definitive Rating Assigned Ba1 (sf)
Cl. K, Affirmed at Ba2 (sf); previously on Jun 24,
2004 Definitive Rating Assigned Ba2 (sf)
Cl. L, Affirmed at Ba3 (sf); previously on Jun 24,
2004 Definitive Rating Assigned Ba3 (sf)
Cl. M, Affirmed at B1 (sf); previously on Jun 24,
2004 Definitive Rating Assigned B1 (sf)
Cl. N, Downgraded to Caa1 (sf); previously on Jun 24,
2004 Definitive Rating Assigned B2 (sf)
Cl. O, Downgraded to Caa2 (sf); previously on Jun 24,
2004 Definitive Rating Assigned B3 (sf)
Moody's rating action did not address the ratings of Classes A-5,
A-6, A-7, B, C, XP and XC,
which are all currently rated Aaa, on review for possible downgrade.
These classes were placed on review on January 19, 2011.
KeyCorp Real Estate Capital Markets, Inc. (KRECM) is the
primary servicer on this transaction and deposits collection, escrow
and other accounts in KeyBank, National Association (KeyBank) KeyBank
no longer meets Moody's rating criteria for an eligible depository
account institution for Aaa and Aa1 rated securities. Moody's
is reviewing arrangements that KeyBank has proposed, and that it
may propose, to mitigate the incremental risk indicated by the lower
rating of the depository account institution, so as possibly to
allow the classes on review to maintain their current ratings.
The upgrades are due to the significant increase in subordination due
to loan payoffs and amortization. The pool has paid down by approximately
24% since Moody's last review and 36% since securitization.
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
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
2.8% of the current balance. At last review,
Moody's cumulative base expected loss was 1.4%.
Moody's stressed scenario loss is 7.9% 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
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 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 in April 2005.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website. In
addition, 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 30
compared to 35 at Moody's prior full 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 July 9, 2009. 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 February 11, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 36% to $1.69
billion from $2.63 billion at securitization. The
Certificates are collateralized by 108 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten loans representing 31% of the pool. The pool contains
three loans with investment grade credit estimates that represent 9%
of the pool. At last review, there were five loans with credit
estimates. These loans have been defeased or paid off since the
last review. Fourteen loans, representing 33% of the
pool, have defeased and are collateralized with U.S.
Government securities. Defeasance at last review represented 8%
of the pool.
Thirty-two loans, representing 22% 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
Two loans have been liquidated from the pool since securitization,
resulting in an aggregate $8.34 million loss (55%
loss severity on average). The pool had not experienced any losses
at last review. Currently, there are six loans, representing
2% of the pool, in special servicing. The master servicer
has recognized an aggregate $11.9 million loss for the three
of the specially serviced loans. Moody's has estimated an
aggregate $20.9 million loss (59% expected loss on
average) for all of the specially serviced loans.
Moody's has assumed a high probability of default for eight poorly
performing loans, representing 3% of the pool, and
has estimated a $7.8 million loss (15% expected loss
based on a 50% probability of default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 95% and 96%, respectively, of the
non-defeased loans in the pool. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 96%
compared to 95% at Moody's prior review. Moody's
net cash flow reflects a weighted average haircut of 13% to the
most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.6%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.34X and 1.15X, respectively,
compared to 1.39X and 1.14X 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 Southland Mall Loan ($77.5
million -- 4.6% of the pool), which is secured
by the borrower's interest in a 1.3 million square foot (SF) regional
mall located in Hayward, California. The GGP-sponsored
loan, which matured in February 2009, was transferred to special
servicing in March 2009 due to maturity default and was included in GGP's
bankruptcy filing. Upon the finalization of a loan modification
and the extension of the maturity date to January 2014, the loan
was returned to the Master Servicer in March 2010. Anchors include
Macy's, J.C. Penney and Kohl's. As of September
2010, the in-line space was 90% leased; essentially
the same as at last review. Excluding the space leased on a month-to-month
basis to temporary tenants, in-line is 84% leased
compared to 71% at last review. Although performance has
declined since last review, Moody's prior analysis reflected
a stressed cash flow due to our concerns about potential negative impact
of the GGP bankruptcy and performance is in line with Moody's expectations.
The trailing 12-month October 2010 comparable in-line sales
were $291 per SF compared to $306 at last review.
Moody's current credit estimate and stressed DSCR are Baa2 and 1.44X,
respectively, essentially the same as at last review.
The second loan with a credit estimate is the Deerbrook Mall Loan ($68.8
million -- 4% of the pool), which is secured by the
borrower's interest in a 1.2 million SF regional mall located in
the suburban Houston suburb of Humble, Texas. The GGP sponsored
loan was transferred to special servicing in March 2009 due to maturity
default and was included in GGP's bankruptcy filing. Upon the finalization
of a loan modification and the extension of the maturity date to January
2014, the loan was returned to the Master Servicer in March 2010.
The property's anchors include Dillard's, Macy's, Sears
and J.C. Penney, none of which are part of the collateral.
As of September 2010, the in-line space was 99% leased
compared to 93% at last review. Excluding space leased on
a month-to-month basis to temporary tenants, in-line
occupancy is 95% compared 87% at last review. Performance
has improved due to higher base revenues. Actual 2009 NOI was 9%
higher than in 2008. The loan is structured with a 25-year
amortization schedule and has amortized by approximately 6% since
last review. Moody's current credit estimate and stressed DSCR
are A3 and 1.87X, respectively, compared to Baa1 and
1.66X at last review.
The third loan with a credit estimate is the 222 East 41st Street Loan
($10.0 million -- 0.6% of the pool),
which is secured by the borrower's interest in a leased fee land parcel
in the Grand Central submarket in New York City. The loan is interest
only for 10 years. The land is improved with a 371,000 square
foot office building constructed in 1999 and leased to the Jones Day Law
firm. The ground lease expires in February 2052. Moody's
current credit estimate and stressed DSCR are Aa2 and 1.20X,
respectively, the same at last review.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the Aegon Center Loan ($106.4
million -- 6.4% of the pool), which is secured
by a 634,000 SF Class A office building located in downtown Louisville,
Kentucky. It is the tallest building in the entire state and is
attached to a 5-level, 791-space garage. As
of November 2010, the property was 95% leased compared to
94% at last review. Major tenants include Aegon N.V.
(Moody's senior unsecured rating A3 - negative outlook; 33%
of the NRA; lease expiration in 2012), Frost Brown Todd (15%
of the NRA; lease expiration in 2020) and Stites and Harbison (12%
of the NRA; lease expiration in 2014). The loan was recently
put on the watch list due to Aegon publicly announcing that it plans to
downsize it's operation by approximately 60,000 SF.
The loan's initial 60-month interest-only period has
expired and the loan has amortized approximately 2% since last
review. Moody's LTV and stressed DSCR are 106% and 0.99X,
respectively, compared to 99% and 1.03X at last review.
The second largest loan is the New Roc City Loan ($41.9
million -- 3.6% of the pool), which is secured
by a 446,000 SF lifestyle retail center located in New Rochelle,
New York. As of November 2010, the property was 85%
leased compared 91% at last review. Actual 2009 NOI was
8% lower than in 2008; however, this is partially offset
by a 3% increase in amortization. Moody's LTV and stressed
DSCR are 88% and 1.20X, respectively, essentially
the same as at last review.
The third largest conduit loan is the Severance Town Center Loan ($41.9
million -- 2.5% of the pool), which is secured
by a 615,000 SF enclosed shopping center located in the Cleveland
Heights section of Cleveland, Ohio. The property is anchored
by Wal-mart, Home Depot and Dave's Market .
As of November 2010, the property was 92% leased compared
to 96% in 2009. Actual 2009 NOI was 15% higher than
in 2008. The loan has amortized by 2% since last review.
Moody's current LTV and stressed DSCR are 99% and 0.99X,
respectively, compared to 119% and 0.82X 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 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.
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 Two, Downgrades Two and Affirms Seven CMBS Classes of GCCF 2004-GG1
250 Greenwich Street
New York, NY 10007