Fitch Ratings has upgraded three classes and affirmed one class of GE Commercial Mortgage Corporation series 2004-C2 commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades are due to significant paydown since the last rating action. Fitch modeled losses of 24.9% of the remaining pool; expected losses on the original pool balance total 1.1%, including $1.5 million (0.1% of the original pool balance) in realized losses to date. Nine assets remain in the pool, which includes four specially serviced assets (42.1% of the pool). At the previous rating action, there were six specially serviced assets, including the largest loan which has now transferred back to the master servicer, and one that liquidated at better than expected recoveries.
As of the December 2014 distribution date, the pool's aggregate principal balance has been reduced by 96.2% to $53.8 million from $1.4 billion at issuance. Per the servicer reporting, two loans (4.8% of the pool) are defeased. Interest shortfalls are currently affecting classes N through P.
Continental Centre is the largest loan in the pool (43%) and is secured by a 477,259 sf office building located in Downtown Columbus, OH. The loan had previously transferred to special servicing in December 2012, for imminent default. Leading up to the transfer the largest tenant SBC/AT&T (currently 33.6% NRA, expiration 12/2017) had reduced their space which impacted the overall performance of the property. Since then a loan modification closed in March 2014 and the loan returned to the master servicer in September 2014. The terms of the loan modification included an A/B note split; $17.5 million A-note and $5.6 million B-note, a maturity extension to March 2019 and a rate reduction. Occupancy was 80.9% as of September 2014 and the annualized year-to-date (YTD) 3rd Qtr 2014 DSCR was 1.1x, after adjusting for burn-off of previous SBC/AT&T 2014 rent concessions.
The next largest contributor to expected losses is an 80,211 sf retail property located in Marlton, NJ, approximately 15 miles east of Philadelphia and 85 miles southwest of New York City (12.8% of pool). The loan was transferred to the special servicer in February 2012 for imminent default. The special servicer took title in September 2013 and the subject is REO. The property was assigned a leasing agent in September 2013 and since the last rating action there has been some leasing activity but no net gain to occupancy. Occupancy was 57% as of the September 2014 and DSCR was 0.48x as of YTD 3rd Qtr 2014.
RATING SENSITIVITIES
The ratings of classes K and L are expected to remain stable and the Positive Outlook on class J reflects the potential for an upgrade should losses be lower than anticipated. While there is significant credit enhancement to class M, an upgrade is not warranted due to pool concentration, binary risk associated with single tenant exposure (10.1% of the pool), and the lack of progress on the remaining specially serviced loans.
Fitch upgrades the following classes and assigns or revises Rating Outlooks as indicated:
--$7.2 million class J to 'BBsf' from 'Bsf'; Outlook to Positive from Negative;
--$8.6 million class K to 'BBsf' from 'CCCsf'; Outlook Stable Assigned;
--$6.9 million class L to 'Bsf' from 'CCCsf'; Outlook Stable Assigned.
Fitch affirms the following classes as indicated:
--$5.2 million class M at 'CCCsf'; RE 100%.
The class A-1, A-2, A-3, A-4, A-1A, B, C, D, E, F, G, H, PPL-1, PPL-2, PPL-3, PPL-4, PPL-5 and PPL-6 certificates have paid in full. Fitch does not rate the class N, O and P certificates. Fitch previously withdrew the rating on the interest-only class X-1 certificates and the interest-only class X-2 certificates have paid in full.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 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' (Aug. 4, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=971335
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