Fitch Downgrades One and Affirms 11 Classes of GECMC 2005-C1
KEY RATING DRIVERS
Concentration remains a key driver of the ratings as only three loans remain in the pool. While credit enhancement continues to increase for the senior-most classes, two of the three outstanding loans, or 90.8% of the pool, are in special servicing. The smallest loan (9.2% of the pool) is the only performing loan and has a maturity date of Feb. 1, 2020.
Lakeside Mall (76.5% of the pool) is the largest loan and is secured by the inline space and one of five anchors (Macy's Men's & Home) within a two-level 1.5 million square foot (sf) regional mall. The property is located in the northern Detroit suburb of Sterling Heights. Additional non-collateral anchors include JC Penney, Sears, Macy's and Lord & Taylor. The trust loan is pari-passu to a $71.5 million notes securitized in COMM 2005-LP5 and is sponsored by GGP. The net operating income (NOI) debt service coverage ratio (DSCR) was reported to be 1.24x for year-end (YE) 2015, up from 1.12x at YE2014, and the May 2016 occupancy was 80.1%, up from 79.6% in February 2015.
The loan was previously in special servicing in relation to GGP's bankruptcy filing, and the original five-year term was extended an additional five years to June 2016. The loan transferred to special servicing in May 2016 for imminent default and failed to repay at maturity. While performance has improved slightly in the last year, the transfer to special servicing and missed maturity deadline indicate the uptick is not likely to be sustained.
Skytop Pavillion (14.3% of the pool) is a 133,631 sf grocery anchored retail property built in 2000 and is located in Cincinnati, Ohio. The asset, which transferred to special servicing in May 2012 for imminent default, has been real estate owned (REO) since January 2014. Occupancy has been static in the 60%-62% range for the last two years. According to Reis, availability in the submarket has been increasing since 2014, when the year-end vacancy rate averaged 12.7%. The special servicer commentary indicates that an offer to purchase the property has been approved, and Fitch expects that the loss associated with the disposition of this asset will be significant.
Versatile Warehouse (9.2% of the pool) is the smallest loan remaining in the pool. The collateral comprises 20 mixed-use buildings utilized for self-storage, auto repair, manufacturing and retail. They are located in an industrial area in Davie, Florida, immediately west of the Ft. Lauderdale-Hollywood International Airport. The rent roll is granular with over 700 tenants, minimizing the risk of any upcoming tenant rollover. The loan has never been delinquent and is in Lockout until November 2019.
The Rating Outlook for class E has been revised to Stable from Negative. The Negative Outlook was previously driven by uncertainty surrounding the likelihood of refinance for the largest loan in the pool. Based on the loan's recent transfer to special servicing and maturity default, the class has been downgraded and the Outlook revised to Stable. The Rating Outlook on class D was revised to Negative from Stable, which is also driven by the transfer of the largest loan to special servicing and uncertainty regarding disposition timing. The Rating Outlook for class C remains Stable. Further upgrades are unlikely given the susceptibility for these classes to be shorted interest payments, especially now that the largest loan is in default. The distressed bonds may be subject to further downgrades as losses are realized.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has downgraded the following class and revised the Rating Outlook as follows:
--$14.7 million class E to 'BBsf' from 'BBB-sf'; Outlook revised to Stable from Negative.
Fitch has affirmed the following classes as follows:
--$3.3 million class C at 'Asf', Outlook Stable;
--$27.2 million class D at 'BBBsf', Outlook revised to Negative from Stable;
--$23 million class F at 'CCCsf', RE 95%;
--$14.7 million class G at 'Csf', RE 0%;
--$10.6 million class H at 'Dsf', RE 0%;
--$0 class J at 'Dsf', RE 0%;
--$0 class K at 'Dsf', RE 0%;
--$0 class L at 'Dsf', RE 0%;
--$0 class M at 'Dsf', RE 0%;
--$0 class N at 'Dsf', RE 0%;
--$0 class O at 'Dsf', RE 0%.
The class A-1, A-2, A-3, A-4, A-5, A-AB, A-1A, A-J and B certificates have been paid in full. Fitch does not rate the class P certificate. Fitch previously withdrew the ratings on the interest-only class X-P and X-C certificates.