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Ratings Lowered On Two Greenwich Capital Commercial Funding Corp. Series 2006-GG7 One Rating Affirmed

  • We have completed our review of Greenwich Capital Commercial Funding Corp.'s series 2006-GG7, a U.S. CMBS transaction, including the credit characteristics and performance of the remaining assets in the pool, the transaction's structure, and the liquidity available to the trust.
  • We lowered our ratings on two classes and affirmed our rating on one class from the transaction.
  • The downgrades reflect the accumulated interest shortfalls, which we expect will remain outstanding in the near term. The affirmation reflects the expected credit enhancement level, which is in line with the affirmed rating.
CENTENNIAL (S&P Global Ratings) Feb. 5, 2019--S&P Global Ratings today lowered 
its ratings on two classes of commercial mortgage pass-through certificates 
from Greenwich Capital Commercial Funding Corp.'s series 2006-GG7, a U.S. 
commercial mortgage-backed securities (CMBS) transaction. At the same time, we 
affirmed our rating on one class from the same transaction (see list).

The downgrades reflect our expectation that the accumulated interest 
shortfalls on classes A-J and B will remain outstanding in the near term and a 
credit support erosion will occur upon the eventual resolution of the seven 
assets ($391.8 million, 77.4%) with the special servicer (discussed below). 
Classes A-J and B had accumulated interest shortfalls outstanding for two and 
three consecutive months, respectively.

According to the Jan. 11, 2019, trustee remittance report, the current monthly 
interest shortfalls totaled $652,315 and resulted primarily from modified 
interest rate reductions totaling $343,228, appraisal subordinate entitlement 
reduction amounts totaling $230,924, and special servicing fees totaling 
$88,271. The current interest shortfalls affected classes subordinate to and 
including class B.

The affirmation reflects the expected credit enhancement level, which is in 
line with the affirmed rating. While available credit enhancement level 
suggests positive rating movement on class A-M, our analysis also considered 
the susceptibility to reduced liquidity support from the seven specially 
serviced assets and the Montehiedra Town Center corrected mortgage loan 
($114.7 million, 22.6%).

TRANSACTION SUMMARY
As of the Jan. 11, 2019, trustee remittance report, the collateral pool 
balance was $506.5 million, which is 14.0% of the pool balance at issuance. 
The pool currently includes two loans and six real estate owned (REO) assets, 
down from 134 loans at issuance. Seven of these assets are with the special 
servicer, none are defeased, and none are on the master servicer's watchlist.

We calculated a 1.45x S&P Global Ratings debt service coverage (DSC) and 92.6% 
S&P Global Ratings loan-to-value (LTV) ratio using an 8.75% S&P Global Ratings 
capitalization rate for the Montehiedra Town Center loan (calculation based on 
the $84.6 million A note balance).

To date, the transaction has experienced $314.7 million in principal losses, 
or 8.7% of the original pool trust balance. We expect losses to reach 
approximately 12.5% of the original pool trust balance in the near term, based 
on losses incurred to date and additional losses we expect on the eventual 
resolution of the seven specially serviced assets.

CREDIT CONSIDERATIONS
As of the Jan. 11, 2019, trustee remittance report, seven assets in the pool 
were with the special servicer, LNR Partners LLC (LNR). The two largest 
specially serviced assets are the following:
  • The Portals I REO asset ($155.0 million, 30.6%) is the largest asset in the pool and has a total reported exposure of $176.5 million. The asset is a 475,975-sq.-ft. office property in Washington, D.C. The loan was transferred to the special servicer on May 17, 2016, because of imminent default and the property became REO on Jan. 27, 2017. LNR stated that it is working to lease up the property. The reported DSC and occupancy for the six months ended June 30, 2018, were 0.26x and 52.0%, respectively. A $9.4 million appraisal reduction amount is in effect against this asset. We expect a minimal loss (less than 25%) upon this asset's eventual resolution.
  • The JPMorgan International Plaza I & II loan ($151.8 million, 30.0%) is the second-largest asset in the pool and has a total reported exposure of $152.3 million. The loan is secured by two office buildings totaling 756,851 sq. ft. in Farmers Branch, Texas. The loan was transferred to the special servicer on Oct. 24, 2017, because of imminent default. The loan was modified in April 2018 into a $120.0 million senior A note and a $31.8 million subordinate note, and the loan maturity was extended to June 6, 2020. LNR has indicated that it is monitoring this loan, which has a reported late but less than one month delinquent payment status. The property is currently vacant. We expect a moderate loss (25-59%) upon this loan's eventual resolution.
The five remaining assets with the special servicer each have individual 
balances that represent less than 5.2% of the total pool trust balance. We 
estimated losses for the seven specially serviced assets, arriving at a 
weighted-average loss severity of 34.7%.

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