NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded seven classes and affirmed 15 classes of GS Mortgage Securities Corporation II (GCCFC) commercial mortgage pass-through certificates series 2006-GG6 due to an increase in expected losses from the specially serviced loans and two loans within the Top 15. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades are due to an increase in modeled losses associated with the already underperforming loans. Fitch modeled losses of 14.6% of the remaining pool; expected losses on the original pool balance total 12.9%, including $113.5 million (2.9% of the original pool balance) in realized losses to date. Fitch has designated 44 loans (20.7%) as Fitch Loans of Concern, which includes 13 specially serviced assets (16.9%).
As of the September 2013 distribution date, the pool's aggregate principal balance has been reduced by 32% to $2.65 billion from $3.9 billion at issuance. Per the servicer reporting, three loans (0.6% of the pool) are defeased. Interest shortfalls are currently affecting classes F through S.
The largest contributor to expected losses is the specially-serviced Windsor Capital Portfolio loan (6.3% of the pool), which is secured by eight full-service Embassy Suites hotels containing a total of 1,906 rooms. The hotels are primarily located in secondary markets across six states, Washington (Bellevue and Lynwood), Oregon (Tigard), Ohio (Blue Ash), Michigan (Livonia), Colorado (Colorado Springs and Denver), and Texas (El Paso). The loan transferred to the special servicer in October 2010 due to imminent maturity default. The special servicer commenced foreclosure proceedings and was granted receivership, but before the receiver could take possession the borrower filed for bankruptcy. Court proceedings are ongoing in efforts to finalize an agreement between the sponsor and lender, which is anticipated to resolve the bankruptcy through the marketing and sale of all the properties. The total exposure of the loan has increased significantly due to fees and expenses.
The next largest contributor to expected losses is the specially-serviced SilverCreek Portfolio loan (2.6%), which is secured by 37 cross-collateralized and cross-defaulted retail strip shopping centers totaling 636,166 square feet (sf) located across 17 states primarily in the mid-west. The loan transferred to the special servicer in January 2010 for monetary default. The Borrower filed Chapter 11 Bankruptcy in the Northern District of Indiana around April 3, 2012. The lender and debtor's chief restructuring officer have reached agreement on a joint plan for the resolution of the bankruptcy which includes the liquidation of the loan collateral through marketing and sale of the 37 properties.
The third largest contributor to expected losses is the Watergate loan (2.5%), which is secured by a 199,603 sf, 12- story office building and the adjoining 61,481 sf Watergate Retail Plaza located in Washington, D.C. The property is part of the six-building Watergate complex, an international landmark. Occupancy was a reported 53.9% as of June 30, 2013, which includes five recently executed leases (28,579 sf). The debt service coverage ratio (DSCR) was a reported 0.46x as of year to date (YTD) June 30, 2013, down from 0.86x at YE 2011 and 1.29x at issuance. The borrower continues to actively market the vacant space through in house and third party brokers.
Rating Outlooks on classes A-2 through A-1A remain Stable due to increasing credit enhancement and continued paydown. Rating Outlooks on classes A-M through A-J are Negative due to the potential of further deterioration in the performance of Fitch Loans of Concern.
Fitch downgrades the following classes and assigns or revises Recovery Estimates (REs) as indicated:
--$292.6 million class A-J to 'Bsf' from 'BBsf'; Outlook Negative;
--$19.5 million class B to 'CCCsf' from 'Bsf'; RE 0%;
--$48.8 million class C to 'CCsf' from 'CCCsf'; RE 0%;
--$39 million class D to 'CCsf' from 'CCCsf'; RE 0%;
--$29.3 million class E to 'CCsf' from 'CCCsf'; RE 0%;
--$43.9 million class F to 'Csf' from 'CCsf'; RE 0%;
--$39 million class G to 'Csf' from 'CCsf'; RE 0%.
Fitch affirms the following classes and revises Rating Outlooks as indicated:
--$390.1 million class A-M at 'AAAsf'; Outlook to Negative from Stable.
--$298.1 million class A-2 at 'AAAsf'; Outlook Stable;
--$75.6 million class A-3 at 'AAAsf'; Outlook Stable;
--$109.5 million class A-AB at 'AAAsf'; Outlook Stable;
--$1 billion class A-4 at 'AAAsf'; Outlook Stable;
--$109.8 million class A-1A at 'AAAsf'; Outlook Stable;
--$39 million class H at 'Csf'; RE 0%;
--$43.9 million class J at 'Csf'; RE 0%;
--$43.9 million class K at 'Csf'; RE 0%;
--$24.4 million class L at 'Csf'; RE 0%;
--$3.7 million class M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%;
--$0 class O at 'Dsf'; RE 0%;
--$0 class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%.
Fitch does not rate the class S certificates. Fitch previously withdrew the ratings on the interest-only class X-P and X-C certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria