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 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 97 loans totaling $1.8 billion. As of the November 2016 remittance, the pool has experienced total collateral reduction of 55.8% 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 6.5% of the current pool balance, are fully defeased. The transaction reports a weighted-average debt service coverage ratio (DSCR) of 1.4 times (x) and a weighted-average debt yield of 7.9%, based on YE2015 reporting.

In the next 12 months, 91 loans representing 65.9% of the current pool balance are scheduled to mature. Excluding defeasance collateral and delinquent specially serviced loans, these loans reported a weighted-average exit debt yield of 9.2%, according to YE2015 financial reporting. While many loans are expected to successfully refinance out of the trust as scheduled, there are likely to also be some maturity defaults, as individual exit debt yields ranged from 4.6% to 25.6%.

There are currently 49 loans on the servicer’s watchlist and 11 loans in special servicing, representing 41.8% and 19.8% of the current pool balance, respectively. Among the specially serviced loans are four loans, representing 2.1% of the current pool balance, that have been deemed non-recoverable by the master servicer. Since issuance, 52 loans have been liquidated from the trust at a combined realized loss of $363.7 million.

The most pivotal loan in the transaction continues to be the Skyline Portfolio loan (Prospectus ID#4; 11.7% 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 (sf). The $678.0 million whole loan initially transferred to special servicing in April 2012 due to 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, with trust modification terms including an A-note of $105.0 million, a B-note of $98.4 million and a five-year maturity extension to February 2022.

In April 2016, the modified A-note was transferred to the special servicer, as the loan’s sponsor, Vornado Realty, decided to no longer keep the loan current. According to YE2015 reporting, the DSCR (based on the modified A-note debt service) declined to 0.71x compared with the YE2014 figure of 1.11x. The decline in performance is directly related to the weak submarket, as according to CoStar, the submarket vacancy for similar properties is 39.5%, with asking rental rates of $30.19 psf gross. The subject portfolio has a current occupancy rate of 50.5%, which has remained relatively unchanged over the past year. Asking rental rates range from $28.00 psf gross to $32.00 psf gross.

The portfolio was last valued at $311.6 million in June 2013 when the asset originally transferred to special servicing. As the loan is now over 90 days delinquent, a new appraisal is expected to be conducted in the near future. As cash flows and the relative strength of the submarket have continued to decline, it is expected that the appraised value of the subject will decline as well. The special servicer is currently negotiating a deed in lieu of foreclosure with the sponsor; however, no time table is available at this time. DBRS expects the trust to experience a significant loss with the resolution of this loan.

For more information on this transaction and supporting data, please log into DBRS CMBS IReports, www.ireports.dbrs.com. DBRS continues to monitor this transaction monthly with periodic updates provided in the DBRS CMBS IReports platform.

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

The applicable methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (October 2016), which can be found on our website under Methodologies.

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