DBRS Updates the Ratings of GECMC, Series 2005-C1

DBRS has today confirmed Classes A-2 through A-J of GECMC, Series 2005-C1, including notional classes X-C and X-P.

In addition, DBRS has downgraded Classes B through M of the transaction primarily because of the projected impact of the resolution of three specially serviced loans: Washington Mutual Buildings (Prospectus ID#9, 3.0% of the current pool balance), Foothill Plaza (Prospectus ID#11, 2.3% of the current pool balance), and Southfork Pointe Retail Center (Prospectus ID#36, 1.2% of the current pool balance). This transaction has a total of eight specially serviced loans, which represent 12% of the current pool balance. Three of the specially serviced loans are real estate owned (REO)—Washington Mutual Buildings, Southfork Pointe Retail Center, and Heritage on the River. The trends on all classes of the transaction are now Stable. DBRS has removed the Negative trend on Classes K through O.

Outside of the specially serviced loans, collateral performance is strong. Fully defeased collateral accounts for 6.9% of the current pool balance. The six largest non-defeased loans in the pool, representing 31.4% of the current pool balance have performed favorably since issuance. These loans include: 401 North Michigan Avenue (Prospectus ID#2, 7% of current pool balance), Lakeside Mall (Prospectus ID#1, 6.7% of current pool balance), Potomac Tower (Prospectus ID#3, 5.8% of current pool balance), Ward Centers (Prospectus ID#4, 4.3% of current pool balance), The Atrium at Continental Park (Prospectus ID#6, 4.2% of current pool balance), and Savannah Apartments (Prospectus ID#8, 3.4% of current pool balance). Although Lakeside Mall and Ward Centers are on the servicer watchlist, both loans are current and continue to exhibit strong performance.

The largest loan of concern is the Washington Mutual Buildings loan, which consists of two office buildings (Oakdale Avenue and Plummer Street) that were left vacant after JPMorgan’s takeover of Washington Mutual in 2009. The properties are located outside of Los Angeles. In August 2009, the two buildings were appraised at $15.8 million ($12.8 million for the Plummer Street building and $3.2 for the Oakdale Avenue building). This represented a substantial reduction from the $63.5 million appraised value at issuance. The loan was first transferred to special servicing in March 2009. According to the special servicer, the Oakdale Avenue building was sold on April 12, 2010 for $3.45 million. The Plummer Street building was sold on October 15, 2010. All proceeds from the sale are expected to be applied to the trust pending the resolution of on-going litigation against the loan guarantor. Although the two properties were sold, DBRS estimates significant losses from this loan due to the lower than expected sale prices.

Foothill Plaza has suffered from volatile occupancy, which prevented the borrower from refinancing when the loan reached maturity in February 2010. The loan is one of three non-performing matured balloon loans that are specially serviced. In September 2009, the subject was only 66% occupied due to tenant departures, including the former third largest tenant, American Sterling Bank (12.2% of the NRA). The property’s occupancy has since improved and in October 2010 it was reported at 77%. Nonetheless, the loan is still experiencing decreasing revenues, which is due primarily to the fact that the borrower is offering concessions. This asset is expected to cause significant losses to the trust.

Southfork Pointe Retail Center is non-performing matured balloon and one of three real estate owned (REO) loans in the pool. This specially serviced loan was scheduled to mature in June 2009, but was unable to refinance. The property has suffered from depressed cash flows due to decreasing occupancy. The retail property was 72.7% occupied as of April 2010, down from YE2009 occupancy of 77%. The YE2009 DSCR was 0.84x, a significant decrease from issuance DSCR of 1.43x. The loan’s appraised value is currently $10.4 million, down from $20.2 million at issuance, causing a monthly ASER of $27,575. The steep appraisal reduction, as well as the high leverage and low DSCR, suggest a potential for significant losses to the trust.

DBRS further notes that Class N, and O continue to have interest in arrears along with Class M.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology and CMBS Surveillance, which can be found on our website under Methodologies.