April 9, 2012 / 7:05 PM / 8 years ago

TEXT-S&P takes rating actions on GE Comm Mortgage 2005-C1

OVERVIEW 	
     -- We raised our ratings on three classes from GE Commercial Mortgage 	
Corp.'s series 2005-C1, a U.S. CMBS transaction.  	
     -- At the same time, we lowered our ratings on two other classes and 	
affirmed our ratings on eight other classes from the same transaction.	
     -- The upgrades reflect increased credit enhancement levels due to the 	
deleveraging of the pool balance, as well as credit enhancement and liquidity 	
levels that provide adequate support through various stress scenarios.	
     -- The downgrades reflect credit support erosion that we anticipate will 	
occur upon the eventual resolution of five ($80.5 million, 7.8%) of the 	
transaction's six specially serviced assets ($95.8 million, 9.3%), as well as 	
a reduction in the liquidity support available to these classes due to ongoing 	
interest shortfalls.	
     -- We lowered our rating on the class G certificate to 'D (sf)' because 	
we believe the accumulated interest shortfalls will remain outstanding for the 	
foreseeable future.	
 	
NEW YORK (Standard & Poor's) April 9, 2012--Standard & Poor's Ratings Services 	
today raised its ratings on three classes of commercial mortgage pass-through 	
certificates from GE Commercial Mortgage Corp.'s series 2005-C1, a U.S. 	
commercial mortgage-backed securities (CMBS) transaction. In addition, we 	
lowered our ratings on two classes and affirmed our ratings on eight other 	
classes from the same transaction (see list).	
	
Our rating actions follow our analysis of the credit characteristics of the 	
collateral remaining in the pool, the deal structure, and the liquidity 	
available to the trust. The upgrades reflect increased credit enhancement 	
levels due to the deleveraging of the pool balance, as well as credit 	
enhancement and liquidity levels that provide adequate support through various 	
stress scenarios.  	
	
The downgrades reflect credit support erosion that we anticipate will occur 	
upon the eventual resolution of five ($80.5 million, 7.8%) of the six assets 	
($95.8 million, 9.3%) that are currently with the special servicer. We also 	
considered the monthly interest shortfalls that are affecting the trust. We 	
lowered our rating on the class G certificate to 'D (sf)' because we believe 	
that the accumulated interest shortfalls will remain outstanding for the 	
foreseeable future. 	
	
The affirmed ratings on the principal and interest certificates reflect 	
subordination and liquidity support levels that are consistent with the 	
outstanding ratings. We affirmed our 'AAA (sf)' rating on the class X-C 	
interest-only (IO) certificate based on our current criteria.	
	
Using servicer-provided financial information, we calculated an adjusted debt 	
service coverage (DSC) of 1.51x and a loan-to-value (LTV) ratio of 87.7%. We 	
further stressed the loans' cash flows under our 'AAA' scenario to yield a 	
weighted average DSC of 1.10x and an LTV ratio of 112.2%. The implied defaults 	
and loss severity under the 'AAA' scenario were 56.0% and 28.6%, respectively. 	
The DSC and LTV calculations noted above exclude five ($80.5 million, 7.8%) of 	
the six assets ($95.8 million, 9.3%) that are currently with the special 	
servicer, and eight defeased loans ($82.1 million, 7.9%). We separately 	
estimated losses for the specially assets and included them in our 'AAA' 	
scenario implied default and loss severity figures.	
	
As of the March 12, 2012, trustee remittance report, the trust experienced 	
monthly interest shortfalls totaling $244,372 primarily related to appraisal 	
subordinate entitlement reduction (ASER) amounts of $34,577, interest not 	
advanced of $176,670, and special servicing and workout fees of $33,124. The 	
interest shortfalls affected all classes subordinate to and including class G. 	
Class G has accumulative interest shortfalls outstanding for five months. We 	
downgraded class G to 'D (sf)' because we expect these interest shortfalls to 	
continue for the foreseeable future. We lowered our rating on class F to 'CCC- 	
(sf)' due to accumulated interest shortfalls outstanding for five months. If 	
class F continues to experience interest shortfalls, we may lower our rating 	
to 'D (sf') on this class. 	
	
CREDIT CONSIDERATIONS	
	
As of the March 12, 2012, trustee remittance report, six assets ($95.8 	
million, 9.3%) in the pool were with the special servicer, LNR Partners LLC 	
(LNR). The reported payment status of the specially serviced assets as of the 	
most recent trustee remittance report is as follows: three are real estate 	
owned (REO) ($72.5 million, 7.0%), two are 90-plus-days delinquent ($8.1 	
million, 0.8%), and one is late but less than 30 days ($15.3 million, 1.5%). 	
Appraisal reduction amounts (ARAs) totaling $41.8 million are in effect 	
against four of the six specially serviced assets. Details of the two largest 	
specially serviced assets, both of which are top 10 assets, are as follows:	
	
The Washington Mutual Buildings asset ($39.0 million, 3.8%) is the 	
fifth-largest asset in the pool. The total reported exposure was $39.6 	
million. The asset consists of three office buildings totaling 257,336 sq. ft. 	
in Los Angeles, Calif. The loan was transferred to the special servicer on 	
March 19, 2009, due to imminent default, and the office properties became REO 	
on Sept. 17, 2009. The sole tenant in the office property, Washington Mutual 	
Inc. (WaMu), was acquired by JPMorgan Chase Bank and the leases were 	
subsequently rejected. LNR informed us that it sold the office portfolio in 	
2010 for a combined total of $15.0 million. However, the transaction has not 	
closed yet due to deficiency claims. LNR is pursuing legal remedies and the 	
sale proceeds are currently held in escrow until the legal issues are 	
resolved. An ARA of $32.9 million is in effect against the asset. We expect a 	
significant loss upon the eventual resolution of this asset.	
	
The Oak Park Office Center asset ($20.4 million, 2.0%), a 173,400-sq.-ft. 	
office building in Houston, is the eighth-largest asset in the pool. The total 	
reported exposure was $21.1 million. The loan was transferred to the special 	
servicer on April 26, 2010, due to imminent default and the property became 	
REO on May 3, 2011. LNR indicated to us that the property is currently listed 	
for sale and an updated appraisal is not available. The reported DSC was 0.71x 	
as of Dec. 31, 2010. We expect a moderate loss upon the eventual resolution of 	
this asset.	
	
The four remaining assets with the special servicer have individual balances 	
that represent less than 1.5% of the total pooled trust balance. ARAs totaling 	
$8.9 million are in effect against three of these assets. We estimated losses 	
for the three of the four remaining assets, arriving at a weighted-average 	
loss severity of 42.0%. LNR stated that it is monitoring the remaining loan 	
since it has a current payment status.	
	
According to the master servicer, one loan, the Lakeside Mall loan, with a 	
trust balance of $84.4 million (8.1%) and a whole-loan balance of $168.7 	
million, was previously with the special servicer and has since been returned 	
to the master servicer. Pursuant to the transaction documents, the special 	
servicer is entitled to a workout fee that is 1.0% of all future principal and 	
interest payments if the loan performs and remains with the master servicer.  	
	
TRANSACTION SUMMARY	
	
As of the March 12, 2012, trustee remittance report, the collateral pool had 	
an aggregate trust balance of $1.04 billion, down from $1.67 billion at 	
issuance. The pool comprises 90 loans and three REO assets, down from 127 	
loans at issuance. The master servicer, GEMSA Loan Services L.P. (GEMSA), 	
provided financial information for 92.5% of the loans in the pool (by 	
balance), which reflected data for full-year 2010, interim- or full-year 2011.	
	
We calculated a weighted average DSC of 1.50x for the loans in the pool based 	
on the servicer-reported figures. Our adjusted DSC and LTV were 1.51x and 	
87.7%, respectively. Our adjusted figures exclude five ($80.5 million, 7.8%) 	
of the six assets ($95.8 million, 9.3%) that are currently with the special 	
servicer, and eight defeased loans ($82.1 million, 7.9%). To date, the 	
transaction has experienced $22.8 million in principal losses from 13 assets. 	
Twenty loans ($254.2 million, 24.5%) in the pool are on the master servicer's 	
watchlist, including two of the top 10 assets, which we discuss below. Sixteen 	
loans ($133.0 million, 12.8%) have a reported DSC of less than 1.10x, 13 of 	
which ($112.0 million, 10.8%) have a reported DSC of less than 1.00x.	
	
SUMMARY OF TOP 10 ASSETS SECURED BY REAL ESTATE	
	
The top 10 assets secured by real estate have an aggregate outstanding pooled 	
balance of $426.9 million (41.2%). Using servicer-reported numbers, we 	
calculated a weighted average DSC of 1.66x for eight of the top 10 assets. The 	
remaining two top 10 assets ($59.4 million, 5.8%) are with the special 	
servicer, which we discussed above. Our adjusted DSC and LTV were 1.65x and 	
83.0%, respectively, for eight of the top 10 assets, excluding the two 	
specially serviced assets. Two ($102.2 million, 9.8%) of the top 10 assets are 	
on the master servicer's watchlist, which we discuss below.	
The Lakeside Mall loan, the second-largest asset in the pool, has a whole-loan 	
balance of $168.7 million that is split into two pari passu pieces, $84.4 	
million of which makes up 8.1% of the pooled trust balance. The loan is 	
secured by 643,375 sq. ft. of a 1.48 million-sq.-ft. regional mall in Sterling 	
Heights, Mich., a suburb of Detroit. According to the master servicer, the 	
loan was previously transferred to the special servicer on April 29, 2009, as 	
part of the GGP bankruptcy. The loan was modified on Jan. 4, 2010 and the 	
modification terms included an extension of the loan's maturity from Dec. 1, 	
2009, to June 1, 2016. The loan was returned to the master servicer on May 20, 	
2010. The loan appears on the master servicer's watchlist due to a low 	
reported DSC, which was 1.19x for the year ended Dec. 31, 2011. Occupancy was 	
70.2% according to the Sept. 30, 2011, rent roll.  	
	
The 23rd & Madison loan ($17.8 million, 1.7%), the 10th-largest asset in the 	
pool, is secured by a 54,027-sq.-ft. grocery-anchored shopping center in 	
Seattle, Wash. The loan is on GEMSA's watchlist due to a low reported DSC, 	
which was 0.91x for year-end 2010. According to GEMSA, the property 	
performance has improved in 2011; the reported DSC and occupancy for the six 	
months ended June 30, 2011, were 1.37x and 88.5%, respectively. GEMSA 	
indicated that it will remove the loan from its watchlist given the positive 	
DSC.	
	
Standard & Poor's stressed the pool collateral according to its criteria. The 	
resultant credit enhancement levels are consistent with our raised, lowered, 	
and affirmed ratings.	
	
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT	
	
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating 	
relating to an asset-backed security as defined in the Rule, to include a 	
description of the representations, warranties and enforcement mechanisms 	
available to investors and a description of how they differ from the 	
representations, warranties and enforcement mechanisms in issuances of similar 	
securities. The Rule applies to in-scope securities initially rated (including 	
preliminary ratings) on or after Sept. 26, 2011. 	
	
If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this 	
credit rating report is available atRELATED CRITERIA AND RESEARCH	
	
     -- Global Structured Finance Scenario And Sensitivity Analysis: The 	
Effects Of The Top Five Macroeconomic Factors, published Nov. 4, 2011.	
     -- U.S. Government Support In Structured Finance And Public Finance 	
Ratings, published Sept. 19, 2011.	
     -- Updated Defeasance Criteria For U.S. CMBS Transactions, published Aug. 	
16, 2011.	
     -- U.S. CMBS Rating Methodology And Assumptions For Conduit/Fusion Pools, 	
published Nov. 3, 2010.	
     -- Methodology And Assumptions For Analyzing The Major Property Types In 	
U.S. CMBS Transactions, published June 14, 2010.	
     -- Global Methodology For Rating Interest-Only Securities, published 	
April 15, 2010.	
     -- U.S. CMBS 'AAA' Scenario Loss And Recovery Application, published July 	
21, 2009.	
     -- Rating U.S. CMBS In The Face Of Interest Shortfalls, published Feb. 	
23, 2006.	
     -- Standard & Poor's Defeasance Criteria For U.S. CMBS Transactions, 	
published April 4, 2003.	
 	
 	
RATINGS RAISED	
	
GE Commercial Mortgage Corp. 	
Commercial mortgage pass-through certificates series 2005-C1	
             Rating	
Class     To          From         Credit enhancement (%)	
A-J       AA+ (sf)    AA- (sf)                      19.41	
B         A+ (sf)     A- (sf)                       15.37	
C         A- (sf)     BBB+ (sf)                     13.75	
	
RATINGS LOWERED	
	
GE Commercial Mortgage Corp. 	
Commercial mortgage pass-through certificates series 2005-C1	
             Rating	
Class     To          From         Credit enhancement (%)	
F         CCC- (sf)   B (sf)                         7.49	
G         D (sf)      CCC+ (sf)                      6.08	
	
RATINGS AFFIRMED	
	
GE Commercial Mortgage Corp. 	
Commercial mortgage pass-through certificates series 2005-C1	
Class     Rating    Credit enhancement (%)	
A-3       AAA (sf)                   30.11	
A-4       AAA (sf)                   30.11	
A-AB      AAA (sf)                   30.11	
A-5       AAA (sf)                   30.11	
A-1A      AAA (sf)                   30.11	
D         BBB- (sf)                  11.13	
E         BB+ (sf)                    9.71	
X-C       AAA (sf)                     N/A	
 	
N/A-Not applicable.
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