DBRS Morningstar Confirms Remaining Two Classes of GE Commercial Mortgage Corporation, Series 2004-C2

DBRS Limited (DBRS Morningstar) confirmed the remaining two classes of Commercial Mortgage Pass-Through Certificates, Series 2004-C2 (the Certificates) issued by GE Commercial Mortgage Corporation, Series 2004-C2, as listed below.

-- Class N at C (sf)
-- Class O at C (sf)

The rating confirmation reflect DBRS Morningstar’s loss projection for the only remaining loan in the pool, Continental Centre (Prospectus ID#8), which is currently in special servicing. The loan is secured by a Class B office property in downtown Columbus, Ohio, and was initially transferred to special servicing in December 2012 for imminent default due to cash flow issues at the property. The loan was modified with a bifurcated A/B note and an extended maturity through March 2019 and returned to the master servicer in September 2014. After successfully performing under the modified terms for the next few years, the loan transferred back to special servicing in May 2017 for imminent default due to tenancy issues and has been real estate owned since December 2019.

According to the latest appraisal obtained by the special servicer, dated October 2019, the property was valued at $13.7 million, an increase from the December 2018 value of $8.7 million, and well below the issuance value of $35.0 million. As of the March 2020 rent roll, the collateral property remains 39.3% occupied with the State of Ohio occupying 28.3% of the total net rentable area. The servicer has confirmed that the property is in a value-add phase while it works to bring the collateral back to the competitive market. The servicer plans to focus on completing necessary work to the property’s elevators and plumbing systems and maintenance work on the building’s exterior to address discoloration.

Given the building’s physical condition issues and low occupancy rate, factors that are considered especially challenging amid the Coronavirus Disease (COVID-19) pandemic, DBRS Morningstar applied a significant haircut to the October 2019 appraised value in its liquidation scenario. With that analysis, DBRS Morningstar assumed a loss severity in excess of 88.0%, suggesting that losses will take out the Class O Certificate balance and will creep into the Class N Certificate balance as well, with limited principal recovery.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#8 – Continental Centre (100.0% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS 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 (March 6, 2020), which can be found on dbrsmorningstar.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 (July 2, 2020), which can be found on dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

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.

Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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