Fitch Downgrades 6 classes of GCCFC 2004-GG1; Removes 3 from Negative Watch

CHICAGO--()--Fitch Ratings has downgraded six classes, removed three from Rating Watch Negative and affirmed seven 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.

KEY RATING DRIVERS

The downgrades are the result of increased interest shortfalls that are currently affecting classes F through P, as well as higher loss expectations, most of which are associated with a recently transferred specially serviced loan. Fitch modeled losses of 21.67% for the remaining pool; expected losses as a percentage of the original pool balance are at 4.00%, including losses already incurred to date (1.29%). Fitch has designated 15 loans (48.7%) as Fitch Loans of Concern, which includes the eight specially serviced loans (25.17%).

As of the February 2014 distribution date, the pool's aggregate principal balance has been reduced by approximately 87.55% to $323.9 million from $2.63 billion at issuance. Interest shortfalls total $4.68 million and affect class P through F. No loans are currently defeased.

The interest shortfalls are primarily the result of a modification of the largest loan in the transaction, the Aegon Center. Fitch expects that interest shortfalls at the current level are likely to continue throughout the remaining extended term of the loan.

The loan (31.8% of the pool), is secured by a 35-story, 633,650 square foot (sf) multi-tenant office tower in the Louisville, KY, central business district. Aegon vacated 200,000 sf of the building at the Dec. 31, 2012 lease expiration date. The loan modification was completed in November 2013 and included an A/B Note split of $82 million for the A portion and $21.8 million for the B portion, a reduced interest payment rate of 4% with periodic step-ups and a loan extension of 60 months to April 2019. The property's management has backfilled 80,000 sf of Aegon's space with a new tenant, Mercer Inc; however, the property remains only 72% occupied.

Fitch assumed losses based on the lower occupancy and rental rate assumptions, as well as considered the time to re-lease the remaining vacant space. The loan has returned to the master servicer, is current and performing within expected parameters after the modification. The loan was the largest contributor to losses in the pool.

The second-largest contributor to modeled losses, Severance Town Center (12.3% of the pool) was transferred to the special servicer January 2014 after major tenant Wal-Mart relocated to a stand-alone site in the area. The loan is secured by a 644,501 sf retail center located in Cleveland Heights, OH, along Mayfield Road and is in close proximity to the Cleveland Clinic and John Carroll University.

Wal-Mart continues to make rental payments on its lease which expires in January 2019. The loan remains current on debt service payments. While the loan may remain current due to continued lease payments from Wal-Mart, Fitch has concerns that tenants with expiring leases in the near term may not renew. Conservative loss assumptions were based on income less vacant space and certain rolling leases.

The third-largest contributor to modeled losses is the real estate owned Skillman Abrams Shopping Center (4.0% of the pool), a 133,088 sf anchored retail center located in Dallas, TX. The loan transferred to the special servicer on Feb. 12, 2013 for imminent monetary default after the grocery anchor vacated the subject to relocate to a new retail center in the submarket. Occupancy at the center fell to a low of 27% during the last quarter of 2013 after another tenant vacated as a result of the anchor leaving the property. Foreclosure was completed in 2H'13 and the special servicer is working to find a new anchor tenant before exploring disposition options.

RATINGS SENSITIVITY

While class D was affirmed at 'AAA', the Outlook was revised to Negative to reflect ongoing risks of increasing interest shortfalls as well as the increasing concentration of the pool. This class may be downgraded if interest shortfalls increase, or if Fitch expected losses continue to increase.

The Negative Outlooks on classes G and H reflect continued concerns with additional deterioration in the performance of the specially serviced loans.

Fitch downgrades the following classes as indicated:

--$32.5 million class E to 'Asf' from 'AAAsf'; Outlook Stable;

--$32.5 million class F to 'BBBsf' from 'Asf'; Outlook Stable;

--$6.5 million class J to 'CCCsf' from 'Bsf'; RE 0%;

--$13 million class L to 'CCsf' from 'CCCsf'; RE 0%;

--$9.8 million class M to 'Csf' from 'CCsf'; RE 0%;

--$9.8 million class N to 'Csf' from 'CCsf'; RE 0%.

Additionally, Fitch affirms the following classes and revises recovery estimates as indicated:

--$48.8 million class B at AAAsf'; Outlook Stable;

--$26 million class C at 'AAAsf'; Outlook Stable;

--$52 million class D at 'AAAsf'; Outlook Negative;

--$9.4 million class G at 'BBBsf'; Outlook Negative;

--$39 million class H at 'Bsf'; Outlook Negative;

--$13 million class K at 'CCCsf'; to RE 0% from RE 80%;

--$6.5 million class O at 'Csf'; RE 0%.

Prior to today's rating actions classes E, F, and G were on Rating Watch Negative.

Classes A-1, A-2, A-3, A-4, A-5, A-6, A-7, OEA-B1, and OEA-B2 have repaid in full. Fitch does not rate $8.4 million class P. Classes XC and XP were previously withdrawn.

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. 11, 2013).

A comparison of the transaction's Representations, Warranties, and Enforcement (RW&E) mechanisms to those of typical RW&Es for the asset class is available in the following reports:

--'FREMF 2012-K17 Multifamily Mortgage Pass-Through Certificates and Freddie mac Structured Pass-Through Certificates, Series K-017'(April 3, 2012).

--'FREMF 2012-K17 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-017 -- Appendix' (April 3, 2012).

Applicable Criteria and Related Research:

FREMF 2012-K17 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-017

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=675108

FREMF 2012-K17 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-017 -- Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=675874

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=821945

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Contacts

Fitch Ratings
Primary Analyst
Jay Bullie
Associate Director
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL 60602
or
Committee Chairperson
Britt Johnson, +1-312-606-2341
Senior Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Jay Bullie
Associate Director
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL 60602
or
Committee Chairperson
Britt Johnson, +1-312-606-2341
Senior Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com