NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded three and affirmed 11 classes of GE Commercial Mortgage Corporation (GECMC) commercial mortgage pass-through certificates series 2005-C2. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades reflect actual and expected increases in credit enhancement from amortization and defeased collateral (13.5% of the pool), and the expectation that the transaction will continue to delever as maturing loans repay. The affirmations reflect the sufficient credit enhancement for the balance of the classes and the overall stable performance of the underlying loans.
Expected losses have declined since Fitch's last rating action due to improved collateral performance across the pool, in addition to higher appraised values and reduced exposure on the specially serviced loans. Fitch modeled losses of 4.9% of the remaining pool; expected losses on the original pool balance total 4.6%, including $40.3 million (2.2% of the original pool balance) in realized losses to date. Fitch has designated 16 loans (15.9%) as Fitch Loans of Concern, which includes six specially serviced assets (7.2%).
As of the April 2014 distribution date, the pool's aggregate principal balance has been reduced by 50% to $932.7 million from $1.86 billion at issuance. Interest shortfalls are currently affecting classes K through Q.
Outlooks remain stable as the classes will continue to benefit from increasing credit enhancement and deleveraging from amortization and repayment of maturing loans. The distressed classes (those rated below 'B') are subject to further downgrades as losses are realized.
The largest contributor to expected losses is secured by a portfolio of two New Jersey properties totaling 125,560 square feet (sf) (1.5% of the pool). The collateral includes a 74,400sf industrial property in Lakewood, NJ and a 51,160sf office property in Montvale, NJ. The portfolio had experienced cash flow issues due to occupancy declines at both properties in 2011. Occupancy for both properties declined to 53% as of September 2013, compared to 70% in December 2011. The loan transferred to special servicing in February 2012 for payment default, and became lender real estate owned (REO) in December 2013.
The next largest contributor to expected losses is the specially-serviced Chatsworth Business Park loan (3.1% of the pool), which is secured by a 231,770 square foot (sf) office property in Chatsworth, CA. The property is 100% leased by two tenants - County of LA (71% NRA) through March 2016 and Sanyo North America Corp. (29% NRA) through February 2017. Sanyo North Amerca Corp. has vacated the property, but continues to pay rent under its lease obligations. The loan, which matured in April 2010, had transferred to special servicing in March 2010 for imminent maturity default, followed shortly thereafter by the maturity of the loan in April 2010. The lender foreclosed on the property and the asset has been REO since August 2012. The asset was offered for sale in an October 2013 auction, but did not sell. The servicer continues to work with a third property manager and leasing agent to stabilize the property. Total exposure on the loan has been reduced to $25 million as of April 2014 from $35.7 million in 2013 through repayment of servicer advances and loan principal from property excess cash flow.
The third largest contributor to expected losses is secured by a 64,849sf suburban office property in Newport Beach, CA (1.3%). The loan had transferred to special servicing in February 2013 for payment default. The property had experienced cash flow issues due to financial distress of its tenant (previously 100% of the net rentable area) which had filed for bankruptcy and subsequently rejected its lease in May 2013. The lender had been dual tracking foreclosure and workout negotiations; however, the borrower had brought the loan current in December 2013. The foreclosure sale was cancelled and the receiver has been discharged.
Fitch upgrades the following classes:
--$14 million class B to 'AAAsf' from 'AAsf'; Outlook Stable;
--$16.3 million class D to 'Asf' from 'BBBsf'; Outlook Stable;
--$25.6 million class E to 'BBB-sf' from 'BBsf'; Outlook Stable.
Fitch affirms the following classes and assigns or revises Rating Outlooks and REs as indicated:
--$440.9 million class A-4 at 'AAAsf'; Outlook Stable;
--$159.3 million class A-1A at 'AAAsf'; Outlook Stable;
--$149.1 million class A-J at 'AAAsf'; Outlook Stable;
--$30.3 million class C at 'Asf'; Outlook to Positive from Stable;
--$16.3 million class F at 'BBsf'; Outlook Stable;
--$21 million class G at 'Bsf'; Outlook Stable;
--$16.3 million class H at 'CCCsf'; RE 100%;
--$21 million class J at 'CCsf'; RE 50%;
--$9.3 million class K at 'Csf'; RE 0%;
--$7 million class L at 'Csf'; RE 0%;
--$6.3 million class M at 'Dsf'; RE 0%.
The class A-1, A-2, A-3 and A-AB certificates have paid in full. Fitch does not rate the class N, O, P and Q certificates. Fitch previously withdrew the ratings on the interest-only class X-C and X-P certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 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. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria