Ratings Lowered On Three Classes From GE Commercial Mortgage Corp. Series 2007-C1 Trust


  • We lowered our ratings on three classes from GE Commercial Mortgage Corp. Series 2007-C1 Trust, a U.S. CMBS transaction, to 'D (sf)' due to accumulated interest shortfalls that we expect to remain outstanding in the near term.
  • The downgrades reflect our analysis of the transaction, which included a review of the credit characteristics and performance of the remaining assets in the pool, the transaction's structure, and the liquidity available to the trust.
NEW YORK (S&P Global Ratings) April 15, 2019--S&P Global Ratings today lowered 
its ratings on three classes of commercial mortgage pass-through certificates 
from GE Commercial Mortgage Corp. Series 2007-C1 Trust, a U.S. commercial 
mortgage-backed securities (CMBS) transaction (see list).

The downgrades of classes A-M, A-MFL, and A-MFX reflect accumulated interest 
shortfalls that we expect to remain outstanding for the foreseeable future. 
The classes had accumulated interest shortfalls outstanding for seven 
consecutive months.

According to the April 10, 2019, trustee remittance report, the current 
monthly interest shortfalls totaled $1.8 million and resulted primarily from:
  • Interest not advanced totaling $1,488,753;
  • Interest rate modification of $486,624; and
  • Special servicing fees totaling $103,498.
These interest shortfalls affected classes subordinate to and including 
classes A-M, A-MFL, and A-MFX. 

TRANSACTION SUMMARY
As of the April 10, 2019, trustee remittance report, the collateral pool 
certificate balance was $518.5 million, which is 13.1% of the pool balance at 
issuance. The transaction is undercollateralized because the asset balance is 
$515.1 million for the same reporting period. The pool currently includes one 
loan, which is also on the master servicer's watchlist ($112.1 million, 21.8% 
of the asset balance) and six real estate owned (REO) assets ($403.0 million, 
78.2%), which are all with the special servicer. There were 197 loans at 
issuance. 

For the sole performing loan, Wellpoint Office Tower, our analysis reflects 
our view that the property may potentially be 100% vacant at year-end 2019. As 
a result, we calculated an S&P Global Ratings debt service coverage (DSC) of 
0.73x and an S&P Global Ratings loan-to-value ratio of over 100% using an S&P 
Global Ratings capitalization rate of 10.25%. The loan is on the master 
servicer's watchlist because the single tenant occupying 100% of the suburban 
office property, which totals 448,072 sq. ft. and secures the mortgage loan, 
has a Dec. 31, 2019, lease expiration. The loan matures on Dec. 1, 2019. The 
tenant has a four-year free rent period from Jan. 1, 2016, through Dec. 31, 
2019. The master servicer, KeyBank Real Estate Capital, stated that monthly 
debt service payments will be made from interest reserve funds until the 
loan's maturity. Our analysis considered refinancing risk, the single tenant 
vacating the property, and the additional costs associated with leasing up the 
vacant space. The reported DSC was 0.95x for the nine months ended Sept. 30, 
2018. 

To date, the transaction has experienced $426.4 million in principal losses, 
or 10.8% of the original pool trust balance. We expect losses to reach 
approximately 18.4% 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 six specially serviced REO assets.

CREDIT CONSIDERATIONS
As of the April 10, 2019, trustee remittance report, six assets in the pool 
were with the special servicers, C-III Asset Management LLC (C-III) and 
CWCapital Asset Management LLC (CWCapital). Details of the two largest 
specially serviced assets are as follows:
  • The Skyline Portfolio REO asset ($203.4 million, 39.5% of the asset balance) is the largest asset in the pool and has a total trust reported exposure of $213.7 million. The asset comprised eight suburban office properties totaling 2.57 million sq. ft. in Falls Church, Va. At issuance, the $678.0 million whole-loan balance was split into three pari passu notes: a $271.2 million A-1 note included in Banc of America Commercial Mortgage Trust 2007-1, a $203.4 million A-2 note included in GE Commercial Mortgage Corp. Series 2007-C1 Trust, and a $203.4 million A-3 note contained in JPMorgan Chase Commercial Mortgage Securities Trust 2007-LDP10--all U.S. CMBS transactions. The whole-loan was previously modified effective as of Oct. 30, 2013, which bifurcated the A-1, A-2, and A-3 notes into an A/B structure and extending the maturity to Feb. 1, 2022, from Feb. 1, 2017, with one 12-month extension option subject to extension hurdles. The whole-loan was transferred back to the special servicer on April 6, 2016, because of imminent monetary default and the properties became REO on Dec. 21, 2016. The reported overall occupancy was 43.0% as of February 2019. CWCapital stated that the properties are currently being marketed for sale. The asset was deemed nonrecoverable, and we expect a significant loss (greater than 60%) upon its eventual resolution.
  • The JPMorgan Portfolio REO asset ($134.5 million, 26.1% of the asset balance) has a total reported exposure of $134.6 million. The asset consists of a 428,629-sq.-ft. office building in Houston. The loan was transferred to the special servicer on March 16, 2017, due to imminent maturity default (matured on April 1, 2017) and the property became REO on Feb. 6, 2018. The property is currently 100% leased to JPMorgan Chase Bank N.A. until Sept. 30, 2021. C-III stated that the property will be marketed for sale this month. The asset has been deemed nonrecoverable, and we expect a significant loss upon its eventual resolution.
The four remaining assets with the special servicers each have individual 
balances that represent less than 4.0% of the total pool trust balance. We 
estimated losses for the six specially serviced assets, arriving at a 
weighted-average loss severity of 74.7%. 
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