Approximately $51 million of structured securities affected
New York, March 05, 2020 -- Moody's Investors Service, ("Moody's") has
downgraded the ratings on three classes in GE Commercial Mortgage Corporation
2005-C4:
Cl. A-J, Downgraded to Caa1 (sf); previously
on Apr 10, 2019 Downgraded to B1 (sf)
Cl. B, Downgraded to C (sf); previously on Apr 10,
2019 Downgraded to Caa1 (sf)
Cl. C, Downgraded to C (sf); previously on Apr 10,
2019 Downgraded to Ca (sf)
RATINGS RATIONALE
The ratings on three P&I classes were downgraded due to an increase
in realized losses from a recently liquidated loan as well as anticipated
losses for the remaining specially serviced loan. The Design Center
of the Americas loan recently liquidated with a $56.8 million
loss and the sole remaining loan, the Fireman's Fund loan,
is in the special servicing.
Moody's base expected loss plus realized losses is now 13.8%
of the original pooled balance, compared to 12.4%
at the Moody's 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 or an improvement in loan performance.
Factors that could lead to a downgrade of the ratings include a decline
in the performance of the loan, an increase in realized and expected
losses from specially serviced loan or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's Approach
to Rating Large Loan and Single Asset/Single Borrower CMBS" published
in July 2017. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Moody's analysis also incorporated a loss and recovery approach in rating
the P&I classes in this deal since 100% of the pool is in special
servicing. In this approach, Moody's determines a probability
of default for specially serviced loan that it expects will generate a
loss and estimates a loss given default based on a review of broker's
opinions of value (if available), other information from the special
servicer, available market data and Moody's internal data.
The loss given default for a loan also takes into consideration repayment
of servicer advances to date, estimated future advances and closing
costs. Translating the probability of default and loss given default
into an expected loss estimate, Moody's then applies the aggregate
loss from specially serviced to the most junior class(es) and the recovery
as a pay down of principal to the most senior class(es).
DEAL PERFORMANCE
As of the February 10, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $51.0
million from $2.4 billion at securitization. The
certificates are collateralized by only one remaining mortgage loan which
is in special servicing.
Twenty-four loans have been liquidated from the pool with losses,
resulting in an aggregate realized loss of $294 million (for an
average loss severity of 53%). The most recent liquidation
as of the February 2020 remittance report was the Design Center of Americas
loan, which liquidated with a $56.8 million loss.
The remaining loan in special servicing is the Fireman's Fund Loan ($51.0
million -- 100% of the pool), which represents
a pari passu portion of a $107.8 million first mortgage
loan. The loan is secured by a 710,000 square foot office
property located in Novato, California, approximately 30 miles
north of downtown San Francisco. The property was formerly the
corporate headquarters for the Fireman's Fund Insurance Company which
leased the entire property through November 2018. The tenant vacated
the building in December 2015 but continued to pay rent through its November
2018 lease expiration date. The property remained vacant and the
loan was transferred to special servicing in October 2018 due to imminent
default. The whole loan was structured with two pari passu notes
A-1 and A-2, with the controlling A-1 note
originally securitized in the BACM 2005-5 transaction. In
March 2019, the $56.6 million A-1 note was
sold which resulted in an approximately 1% loss to the BACM 2005-5
transaction. The A-2 remains in this trust. The property
became REO in September 2019 and the special servicer indicated the property
is being actively marketed for sale. The potential sale proceeds
from a disposition will be distributed pro-rata to A1 note and
A2 note, 52.4% / 47.6%, respectively.
The property has been essentially dark since 2015 and the loan has been
deemed non-recoverable. Moody's anticipates a significant
loss on this loan.
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, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
Dariusz Surmacz
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Matthew Halpern
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653