DBRS Morningstar Places Two Classes of GE Commercial Mortgage Corporation, Series 2007-C1 Under Review with Developing Implications

DBRS, Inc. (DBRS Morningstar) placed the ratings of the following two classes of Commercial Mortgage Pass-Through Certificates, Series 2007-C1 issued by GE Commercial Mortgage Corporation, Series 2007-C1 Under Review with Developing Implications:

-- Class A-M rated BB (low) (sf)
-- Class A-MFX rated BB (low) (sf)

The ratings were placed Under Review with Developing Implications following the publication of the November 2019 remittance report for the transaction, which reported realized losses of $196.7 million, as four loans were liquidated from the trust, leaving only three of the original 197 loans remaining in the trust. The liquidation of these loans also resulted in principal proceeds of $51.6 million, which were applied to the outstanding principal balances of the Class A-M, A-MFL and A-MFX bonds on a pro rata basis. Cumulatively, these bonds have an outstanding balance of $99.3 million as of the November 2019 remittance.

Since issuance, the transaction has experienced collateral reduction of 93.2%; however, 16.9% of that is a result of realized losses, which totaled $623.1 million through November 2019, with the Class A-J and A-JFL bonds experiencing losses this month. Of the remaining collateral in the pool, two loans (58.0% of the current pool balance) are in special servicing and are expected to result in significant losses upon resolution, each with a projected loss severity at or near 100.0%.

The single performing loan, Wellpoint Office Tower (Prospectus ID#10; 42.0% of the current pool balance), is on the servicer’s watchlist and is secured by a 450,000-square-foot single-tenant office in Woodland Hills, California, built in 1977. The subject is fully occupied by WellPoint Health Networks (WellPoint Health), an affiliate of Anthem Health; however, its lease expires at year-end 2019, one month ahead of the December 1, 2019, loan maturity date. It has been known that WellPoint Health will vacate at lease expiration and move to a property within the nearby Warner Center; however, the borrower is committed to the property. According to a May 2019 Bisnow Media article, the private ownership group has engaged Lincoln Property Company to oversee a $40.0 million to $50.0 renovation plan to modernize the property. The project is expected to begin January 2020 and be completed by mid-year. While DBRS Morningstar has not received confirmation that the loan will be paid in full at maturity, the news articles and activity surrounding a planned significant modernization of the building is positive. The current outstanding loan balance of $112.1 million is greater than the cumulative Class A-M, A-MFL and A-MFX bond balance of $99.3 million, such that a successful refinance of the loan would result in the repayment of the outstanding DBRS Morningstar-rated bonds.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS Morningstar.

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

The principal methodology is the North American CMBS Surveillance Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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