Fitch Takes Various Actions on GCCFC 2004-C1

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded four classes, upgraded three classes, and affirmed 11 classes of Greenwich Capital Commercial Funding Corp. (GCCFC), series 2004-GG1 commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this release.

The downgrades are a result of an increase in expected losses across the pool (representing 1.2% of the initial pool balance) relative to the previous Fitch rating action. Fitch modeled losses of 4.6% of the remaining pool balance; expected losses as a percentage of the original pool are at 3.3%, including losses realized to date (0.8%). Fitch has identified 32 loans (29.2% of the current pooled balance) as Fitch Loans of Concern, including the six loans in special servicing (2.9%). Fitch expects that the unrated class P will absorb expected losses associated with the specially serviced loans. Interest shortfalls totaling $1.2 million are affecting class P.

The upgrades and Positive Outlooks are primarily a result of the defeasance of the 111 Eighth Avenue loan (9.5% of the current pooled balance) subsequent to the previous Fitch rating action. (Note: The class OEA-B1 and OEA-B2 certificates previously represented an interest in a subordinate note secured by the property; and that note was included in the defeasance.) In total, 11 loans (29.1% of the current pooled balance) have been defeased. As of the July 2011 distribution date, the pool's aggregate principal balance has been reduced by approximately 44% to $1.5 billion from $2.6 billion at issuance, due to a combination of paydown (43.2%) and realized losses (0.8%).

The largest contributor to modeled losses is a loan (7.3% of the current pooled balance) secured by a 633,650-square foot (sf) office with garage located in the Louisville, KY, central business district. The 35-story, class A property is currently approximately 94% leased and had a servicer-reported debt service coverage ratio (DSCR) of 1.50 times (x) as of year-end (YE) 2010 on a net operating income (NOI) basis. However, the largest tenant (comprising 39.1% of the net rentable area [NRA]) has publicly stated that it intends to vacate the bulk of its space (30% of the NRA) that expires in 2012.

According to various media reports, the office building's projected vacancy of nearly 200,000 sf will represent the largest block of space available in Louisville and is expected to roughly double the market vacancy rate. Cash flow is currently being swept and a reserve is expected to build to $17.50 per sf of vacant space. In its modeling of the loan, Fitch applied a downward adjustment to NOI commensurate with the anticipated decline in revenues associated with the expiring space.

The second-largest contributor to modeled losses is a loan (1.4% of the current pooled balance) secured by a roughly 62,000-sf anchored retail property with garage located in Chicago. Occupancy at the property dropped to 44% following the vacancy of two tenants, prior to rebounding to 60% with recent lease-up. The property benefits from a strong location, and the borrower is reportedly in discussions with various tenants potentially interested in the remaining vacant space. Collected reserves for leasing costs are limited. The loan remains current.

The third-largest contributor to modeled losses is a loan (0.9% of the current pooled balance) secured by a mineral springs spa and resort with 74 rooms. The loan was previously specially serviced, but was reinstated with the master servicer as a corrected loan. Though the hotel outperforms its competitive set, expenses remain elevated due to damages likely caused by soil compaction at the property, and it is unclear if long-term repairs have been made. With a servicer-reported DSCR of 1.15x as of YE 2010, Fitch anticipates that the loan could default at maturity.

Fitch has downgraded the following classes and assigned or revised Recovery Ratings (RRs), as indicated:

--$13 million class L to 'Bsf/LS5' from 'BB-sf/LS5'; Outlook Stable;

--$9.8 million class M to 'B-sf/LS5' from 'B+sf/LS5'; Outlook Negative;

--$9.8 million class N to 'CCCsf/RR5' from 'Bsf/LS5';

--$6.5 million class O to 'CCsf/RR6' from 'CCCsf/RR1'.

Fitch has upgraded the following classes and revised a Loss Severity (LS) rating, as indicated:

--$32.5 million class E to 'AAAsf/LS5' from 'AAsf/LS4'; Outlook Stable;

--$9.7 million class OEA-B1 to 'AAAsf/LS1' from 'BBB-sf/LS1'; Outlook Stable;

--$13.4 million class OEA-B2 to 'AAAsf/LS1' from 'BBB-sf/LS1'; Outlook Stable.

In addition, Fitch has affirmed the following classes and revised LS ratings and Outlooks, as indicated:

--$0.6 million class A-5 at 'AAAsf/LS1'; Outlook Stable;

--$100 million class A-6 at 'AAAsf/LS1'; Outlook Stable;

--$1 billion class A-7 at 'AAAsf/LS1'; Outlook Stable;

--$61.8 million class B at 'AAAsf'; LS to 'LS4' from 'LS3'; Outlook Stable;

--$26 million class C at 'AAAsf'; LS to 'LS5' from 'LS4'; Outlook Stable;

--$52 million class D at 'AAAsf'; LS to 'LS4' from 'LS3'; Outlook Stable;

--$32.5 million class F at 'A+sf'; LS to 'LS5' from 'LS4'; Outlook to Positive from Stable;

--$26 million class G at 'A-sf'; LS to 'LS5' from 'LS4'; Outlook to Positive from Stable;

--$39 million class H at 'BBBsf'; LS to 'LS5' from 'LS4'; Outlook Stable;

--$6.5 million class J at 'BB+sf/LS5'; Outlook Stable;

--$13 million class K at 'BBsf/LS5'; Outlook Stable.

Classes A-1, A-2, A-3, and A-4 have repaid in full. Fitch does not rate the $22.7 million class P.

Fitch has withdrawn the rating on the interest-only classes XP and XC. (For additional information on the withdrawal of the rating on the interest-only classes, see 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities', dated June 23, 2010.)

Additional information on Fitch's criteria is available in the Nov. 17, 2010 report, 'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions', which is available at 'www.fitchratings.com' under the following headers:

Structured Finance then CMBS then Criteria Reports

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 13, 2010);

--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Nov. 17, 2010).

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