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

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

On November 15, 2019, DBRS Morningstar placed these same ratings Under Review with Developing Implications in response to the upcoming maturity of the Wellpoint Office Tower loan (Prospectus ID#10; 45.5% of the current pool balance), which was scheduled to occur on December 1, 2019. DBRS Morningstar changed the Implications to Negative from Developing as the loan transferred to the special servicer for imminent maturity default later in November 2019. At this time, the ultimate resolution strategy and timing for the loan are being evaluated with an update likely in the next 90 days.

The 450,000 sf former single-tenant office property is located in Woodland Hills, California, and was built in 1977. WellPoint Health Networks (WellPoint Health), an affiliate of Anthem Health, was the sole tenant through year-end 2019; however, in July 2018, WellPoint Health announced that it wouldn’t renew its lease and would be moving to the nearby Warner Center. At issuance, the property’s appraised value was $150.0 million ($335 psf); however, the February 2020 Investor Reporting Package showed a $28.0 million appraisal reduction amount, indicating the asset’s value likely declined, especially in light of the property’s vacancy and 1970s vintage in comparison with newer office product in the area. According to the special servicer, an updated appraisal is in process, but it has not been finalized at this time.

According to a May 2019 Bisnow article, the property’s private ownership group engaged LPC West, a division of Lincoln Property Company, to oversee a $40.0 million to $50.0 million renovation plan to modernize the building with a scheduled start date of January 2020; however, this plan is on hold. According to the special servicer, the borrower intends to make a proposal to resolve the loan, but there are no further details available at this time. The ultimate resolution price and timing of the asset will determine if the Class A-M, A-MFL, and A-MFX bonds, which total $99.3 million as of the February 2020 remittance, will be paid in full or experience a loss. Including the current outstanding loan balance, all outstanding fees and advances, and a 1.0% special servicer resolution fee, the current exposure on the loan is $115.6 million.

Since issuance, the transaction has experienced collateral reduction of 93.8%, but 17.4% of that is a result of realized losses, which totaled $643.3 million through February 2020. The other remaining loan in the pool, JP Morgan Portfolio (Prospectus ID#7; 54.5% of the current pool balance), has been in special servicing since March 2017 and is likely to resolve with a loss severity near 100.0%.

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

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for most outstanding commercial mortgage-backed security transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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 Morningstar 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

DBRS, Inc.
333 West Wacker Drive, Suite 1800
Chicago, IL 60606 USA