DBRS Confirms 13 and Upgrades Four Classes of GE Commercial Mortgage Corporation, Series 2004-C2

DBRS has today upgraded four classes of the GE Commercial Mortgage Corporation, Series 2004-C2 Commercial Mortgage Pass-Through Certificates as follows:

--Class C to AAA (sf) from AA (high) (sf)
--Class D to AA (high) (sf) from AA (sf)
--Class E to AA (low) (sf) from A (sf)
--Class F to A (sf) from A (low) (sf)

DBRS has also confirmed the ratings of 13 classes as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-1A at AAA (sf)
-- Class B at AAA (sf)
-- Class X-1 at AAA (sf)
-- Class G at BBB (high) (sf)
-- Class H at BBB (low) (sf)
-- Class J at BB (sf)
-- Class K at B (sf)
-- Class L at B (low) (sf)
-- Class M at CCC (sf)
-- Class N at CCC (sf)
-- Class O at CCC (sf)

All trends are Stable.

These ratings actions reflect the overall strong performance of the pool with a weighted-average debt service coverage ratio (DSCR) of 1.55 times (x) and a weighted-average debt yield of 11.77%, as calculated on the outstanding whole loan balances as of the October 2012 remittance report and the most recent year-end NCF figures for each loan in the trust. There are 95 of the 119 original loans remaining in the pool with a collateral reduction of 31.31%. There are 13 defeased loans, representing 2.56% of the outstanding pool balance. The performance of the largest 15 loans in the pool is quite strong with a weighted-average DSCR of 1.88x and a weighted-average debt yield of 14.00%, as calculated on the outstanding whole loan balances and the most recent year-end NCF figures for each loan.

As of the October 2012 remittance, there are 19 loans on the servicer’s watchlist, representing 24.93% of the pool balance. Of these loans, eight individually represent more than 1.00% of the pool balance, six of which are in the top 15 loans in the transaction. The loans on the watchlist have a weighted-average NCF decline since issuance of 22.74%, with a weighted-average DSCR of 1.01x.

There is one loan in special servicing, representing 0.81% of the current pool balance. Prospectus ID #51, Shops at Borders, is secured by an 80,126 sf strip retail center in Marlton, New Jersey, approximately 15 miles east of Philadelphia. The property, at issuance, was anchored by Borders, which filed for bankruptcy and vacated the property in early 2011. The absence of an anchor tenant and the vacancy of large space have negatively impacted occupancy at the property and is 53% occupied, as of the May 2012 rent roll. The immediate area is oversaturated with retail development, contributing to increased tenant concessions and lower submarket rents over the past few years. The loan was transferred to special servicing in February 2012 when the borrower requested relief due to declining cash flows at the property. The loan is due for the January 2012 payment and all scheduled payments due thereafter. The April 2012 appraisal valued the property at $8.1 million, down from $13.4 million at issuance. The special servicer filed for foreclosure in October 2012, but may not take title of the property from to one to two years due to New Jersey law. Based on the April 2012 appraisal value, DBRS currently projects a 10.46% loss severity for this loan in a liquidation scenario.

There are a total of four loans shadow-rated investment grade by DBRS remaining in the pool, representing a combined 21.29% of the outstanding pool balance.

For additional details on the DBRS viewpoint for this transaction, and for details on the largest loans in the pool and all of the loans on the servicer’s watchlist, please see the October 2012 Monthly Surveillance Report for this transaction, which will be published shortly.

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

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (May 2011), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.