DBRS Confirms Ratings on GECMC 2007-C1

DBRS, Inc. (DBRS) has today confirmed the ratings on GE Commercial Mortgage Corporation’s Commercial Mortgage Pass-Through Certificates, Series 2007-C1 as follows:

-- Class A-M at BB (sf)
-- Class A-MFX at BB (sf)

The trends are Stable.

The rating confirmations reflect the stable performance of the transaction. The ratings were originally issued at the request of an investor and are based exclusively on the credit provided by the transaction structure and underlying trust assets.

The transaction currently consists of 132 loans, totaling $2.3 billion. As of the November 2015 remittance, the pool has experienced total collateral reduction of 41.6% as a result of loan repayments, scheduled amortization and recovered proceeds and realized losses associated with loan liquidations. The transaction also benefits from defeasance collateral, as nine loans, representing 8.1% of the current pool balance, are fully defeased. The transaction reports a weighted-average debt service coverage ratio of 1.3 times and a weighted-average debt yield of 8.1%, based on YE2014 reporting.

There are currently 28 loans on the servicer’s watchlist and ten loans in special servicing, representing 30.9% and 6.1% of the current pool balance, respectively. Among the special-serviced loans, there are three loans, representing 1.4% of the current pool balance, that have been deemed non-recoverable by the master servicer. Since issuance, 51 loans have been liquidated from the trust at a combined realized loss of $363.8 million.

The most pivotal loan in the transaction continues to be the Skyline Portfolio loan (Prospectus ID#4; 8.7% of the current pool balance), which is secured by a portfolio of Class A and Class B office properties in Falls Church, Virginia, totaling over 2.6 million square feet. The $678.0 million whole loan initially transferred to special servicing in April 2012 because the payment default after occupancy decreased as a result of the Department of Defense and its subcontractor tenants vacating the property. The loan was ultimately modified in November 2013, and trust modification terms include an A-note of $105.0 million, a B-note of $98.4 million and a five-year maturity extension to February 2022. While the A-note will remain interest only and continue to pay interest at the original rate of 5.7%, the B-note will accrue interest. As part of the modification, the sponsor, Vornado Realty Trust (Vornado), made a $150 million funding vehicle available, which is the estimated combined tenant improvement/leasing commission and reserve requirements expenditure needed through 2020. According to the most recent reporting, portfolio occupancy as of July 2015 has declined to 46.0%, down from 58.0% at YE2013. According to CoStar, however, portfolio occupancy is 51.3%. In conjunction with the decrease in occupancy, the YE2014 net cash flow decreased to $22.4 million from the YE2013 figure of $25.8 million. Through Q2 2015, net cash flow remains further depressed at $8.1 million. While the loan is sponsored by a financially strong and experienced sponsor in Vornado, the property has continued to struggle in attracting new tenants since the loan’s modification. According to CoStar, the submarket has a high vacancy rate of 38.3%, which is a significant impediment to leasing momentum. The modified A-note remains current at this time.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are North American CMBS Rating Methodology (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.