February 8, 2012 / 9:31 PM / 8 years ago

TEXT-S&P cuts 4 GE Commercial Mortgage 2003-C1 ratings

Feb 8 - OVERVIEW	
     -- We lowered our ratings on four classes from GE Commercial Mortgage 	
Corp.'s series 2003-C1, a U.S. CMBS transaction.	
     -- In addition, we affirmed our ratings on 11 other classes from the same 	
transaction. 	
     -- The downgrades reflect reduced liquidity support available to the 	
affected classes.	
    	
     Feb 8 - Standard & Poor's Ratings Services today lowered its ratings on
four classes of commercial mortgage pass-through certificates from GE Commercial
Mortgage Corp.'s series 2003-C1, a U.S. commercial mortgage-backed securities
(CMBS) transaction. In addition, we affirmed our ratings on 11 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, as well as the deal structure and the 	
liquidity available to the trust. We downgraded the class K, L, M, and N 	
certificates to reflect reduced liquidity support available to these classes. 	
We also considered the near-term loan maturities and the potential for the 	
transaction to experience future interest shortfalls and reduced liquidity 	
support because we believe a portion of these loans may be transferred to the 	
special servicer if the respective borrowers are not able to refinance or 	
payoff these loans at maturity. Excluding the defeased loans ($197.9 million, 	
27.9%) and specially serviced assets ($29.2 million, 4.1%), 64.2% ($455.2 	
million) of the remaining loans mature in 2012 and 2013. 	
	
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-1 	
interest-only (IO) certificate based on our current criteria.	
	
Using servicer-provided financial information, we calculated an adjusted debt 	
service coverage (DSC) of 1.37x and a loan-to-value (LTV) ratio of 85.2%. We 	
further stressed the loans' cash flows under our 'AAA' scenario to yield a 	
weighted average DSC of 1.17x and an LTV ratio of 106.2%. The implied defaults 	
and loss severity under the 'AAA' scenario were 31.4% and 30.5%, respectively. 	
All of the DSC and LTV calculations we noted above exclude the transaction's 	
five ($29.2 million, 4.1%) assets that are currently with the special servicer 	
and 23 ($197.9 million, 27.9%) defeased loans. We separately estimated losses 	
for the excluded specially serviced assets and included them in the 'AAA' 	
scenario implied default and loss severity figures. 	
	
CREDIT CONSIDERATIONS	
	
As of the Jan. 10, 2012, trustee remittance report, four ($16.6 million, 2.3%) 	
assets in the pool were with the special servicer, LNR Partners LLC (LNR). The 	
master servicer informed us that one additional loan, the Commerce Park II 	
loan ($12.7 million, 1.8%), was transferred to LNR subsequent to the January 	
2012 trustee remittance report. The payment status of the specially serviced 	
assets as of the Jan. 10, 2012, trustee remittance report is as follows: one 	
($1.6 million, 0.2%) is real estate-owned (REO); one ($7.7 million, 1.1%) is 	
90-plus days delinquent; one ($5.4 million, 0.8%) is 60 days delinquent; and 	
two ($14.5 million, 2.0%) are in their grace periods. Appraisal reduction 	
amounts (ARAs) totaling $6.1 million are in effect for two of the specially 	
serviced assets. Details on the five specially serviced loans are as follows:	
	
The Commerce Park II loan ($12.7 million, 1.8%), the ninth-largest loan 	
secured by real estate in the pool, is secured by 250,662 sq. ft. of 	
industrial properties in Irving, Texas. The master servicer indicated that the 	
loan was transferred to LNR on Jan. 12, 2012 (subsequent to the January 2012 	
trustee remittance report) due to imminent default. The master servicer placed 	
the loan on its watchlist due to a low reported DSC, which was 1.04x for the 	
nine months ending Sept. 30, 2011. The September 2011 rent roll shows the 	
property to be 77.0% occupied. LNR is currently evaluating a workout strategy 	
for this loan. We expect a moderate loss upon the eventual resolution of this 	
loan. 	
	
The Concourse Center loan ($7.7 million, 1.1%) has a total reported exposure 	
of $9.0 million. It is secured by a 468,726-sq.-ft. industrial property in 	
Cheektowaga, N.Y. The loan, which has a reported 90-day delinquent payment 	
status, was transferred to the special servicer on Nov. 2, 2009, for imminent 	
default. LNR indicated that a receiver was appointed in April 2011. Recent 	
financial reporting information is not available. An ARA of $4.5 million is in 	
effect against the loan. We expect a significant loss upon the resolution of 	
this loan.	
	
The Shoppes at Audubon loan ($5.4 million, 0.8%) has a total reported exposure 	
of $5.5 million. It is secured by a 46,252-sq.-ft. retail property in Naples, 	
Fla. The loan was transferred to the special servicer on June 1, 2011, for 	
imminent default. The loan's payment status is reported as 60-days delinquent. 	
The special servicer and the borrower are currently in discussions regarding 	
the delinquent payments. The reported DSC on the loan was 0.84x as of Dec. 31, 	
2010, and the reported occupancy was 75.0% as of April 2011. An ARA of $1.6 	
million is in effect against the loan. We expect a moderate loss upon the 	
resolution of this loan.	
	
The Paradise Village MHC loan ($1.8 million, 0.2%) has a total reported 	
exposure of $1.8 million.  It is secured by an 81-pad manufacturing housing 	
community in Tucson, Ariz. The loan was transferred to the special servicer on 	
July 26, 2011, for collateral risk nonmonetary default. The reported DSC was 	
1.63x as of Dec. 31, 2010, and the reported occupancy was 83.0% as of June 	
2011. We expect a minimal loss upon the eventual resolution of this loan. 	
	
The Woodridge Health Center asset ($1.6 million, 0.2%) has a total reported 	
exposure of $3.1 million. The loan was transferred to LNR on May 11, 2010, and 	
the asset became REO on April 28, 2011. The 59,942-sq.-ft. office property in 	
Washington, D.C., is fully vacant. According to the special servicer, leasing 	
efforts are ongoing. We believe the master servicer, Bank of America N.A. 	
(BofA), will likely declare a nonrecoverability determination in the near term 	
due because it has already advanced a significant amount (approximately $1.5 	
million to date) for this asset. It is our opinion that a nonrecoverability 	
determination will likely cause liquidity interruptions due to higher interest 	
shortfalls. We expect a minimal loss upon the eventual resolution of this 	
asset.	
	
TRANSACTION SUMMARY	
	
As of the Jan. 10, 2012, trustee remittance report, the collateral pool had a 	
trust balance of $709.5 million, down from $1.19 billion at issuance. The pool 	
currently includes 101 loans and one REO asset, compared to 134 loans at 	
issuance. The master servicer provided financial information for 98.2% of the 	
pool (by balance), the majority of which reflected full-year 2010 or 	
partial-year 2011 data.	
	
We calculated a weighted average DSC of 1.40x for the pool based on the 	
reported figures. Our adjusted DSC and LTV ratio were 1.37x and 85.2%, 	
respectively, which exclude the transaction's five ($29.2 million, 4.1%) 	
assets that are currently with the special servicer and 23 ($197.9 million, 	
27.9%) defeased loans. We separately estimated losses for the excluded 	
specially serviced assets. To date, the trust has experienced $16.9 million in 	
principal losses related to five assets. Twenty-one loans ($174.4 million, 	
24.6%), including four ($78.6 million, 11.1%) of the top 10 loans in the pool, 	
are on the master servicer's watchlist. Excluding the defeased loans and 	
specially serviced assets, 72 ($455.2 million, 64.2%) loans mature in 2012 and 	
2013.	
	
SUMMARY OF TOP 10 LOANS	
	
The top 10 loans secured by real estate have an aggregate outstanding trust 	
balance of $202.1 million (28.5%). Using servicer-reported numbers, we 	
calculated a weighted average DSC of 1.40x for nine of the top 10 loans. The 	
remaining top 10 loan ($12.7 million, 1.8%) is currently with the special 	
servicer and was discussed above. Our adjusted DSC and LTV ratio for nine of 	
the top 10 loans, excluding the specially serviced loan, were 1.30x and 83.8%, 	
respectively. Four ($78.6 million, 11.1%) of the top 10 loans, including the 	
Commerce Park II loan (discussed above), in the pool are on the master 	
servicer's watchlist, and are discussed below.	
	
The Centennial Center I loan ($36.4 million, 5.1%), the second-largest loan in 	
the pool, is on the master servicer's watchlist due to a low reported DSC, 	
which was 1.03x as of Dec. 31, 2010. The loan is secured by a 355,457-sq.-ft. 	
retail power center in Las Vegas, Nev. Occupancy was 85.4% according to the 	
October 2011 rent roll. Circuit City occupied the property but vacated the 	
space after declaring bankruptcy. The space remained vacant as of the October 	
2011 rent roll.	
	
The Charter Woods Apartments loan ($14.8 million, 2.1%), the seventh-largest 	
loan in the pool, is on the master servicer's watchlist due to a low reported 	
DSC, which was 1.02x for the nine months ended Sept. 30, 2011. The loan is 	
secured by a 307-unit multifamily property in Fairborn, Ohio, built in 1998. 	
Occupancy was 96.4%, according to the October 2011 rent roll.	
	
The Chatham Retail loan ($14.7 million, 2.1%), the eighth-largest loan in the 	
pool, is on BofA's watchlist because some tenants have leases that roll within 	
the next six months. The loan is secured by a 34,451-sq.-ft. retail space in 	
New York City. The largest tenant, Banana Republic, which occupied 20,892 sq. 	
ft. (60.6% of the space), had a lease that expired on Jan. 31, 2012. According 	
to BofA, Banana Republic will vacate the space, but expects Pier 1 Imports 	
Inc. to lease a majority of the vacated space. 	
	
Standard & Poor's stressed the assets in the pool according to its current 	
criteria, and the analysis is consistent with the 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.	
     -- Standard & Poor's Defeasance Criteria For U.S. CMBS Transactions, 	
published April 4, 2003.	
  	
RATINGS LOWERED	
	
GE Commercial Mortgage Corp. 	
Commercial mortgage pass-through certificates series 2003-C1	
             Rating	
Class  To              From        Credit enhancement (%)	
K      B+ (sf)         BB+ (sf)                      4.53	
L      B- (sf)         BB- (sf)                      3.48	
M      CCC+ (sf)       B+ (sf)                       3.06	
N      CCC- (sf)       CCC+ (sf)                     1.59	
	
RATINGS AFFIRMED	
	
GE Commercial Mortgage Corp. 	
Commercial mortgage pass-through certificates series 2003-C1	
Class   Rating                Credit enhancement (%)	
A-4     AAA (sf)                               29.45	
A-1A    AAA (sf)                               29.45	
B       AAA (sf)                               23.59	
C       AAA (sf)                               21.28	
D       AA+ (sf)                               17.72	
E       AA (sf)                                15.42	
F       A+ (sf)                                13.95	
G       A (sf)                                 11.65	
H       BBB+ (sf)                               9.34	
J       BBB- (sf)                               5.78	
X-1     AAA (sf)                                 N/A	
N/A--Not applicable.	
	
Primary Credit Analyst: Dennis Sim, New York (1) 212-438-3574;	
                        dennis_sim@standardandpoors.com	
Secondary Contact: Barbara Hoeltz, New York (1) 212-438-3621;	
                   barbara_hoeltz@standardandpoors.com
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below