November remittance data showed that the $192 million loan backed by the Manhattan Apartment Portfolio was liquidated. According to Barclays Capital CMBS analysts, if the loan's disposition strategy is right, this might be considered the largest note sale ever in CMBS.

The loan, which comprised 5.4% of the GE Commercial Mortgage Corp. 2007-1 offering, was in foreclosure previously, according to a report from Bank of America Merrill Lynch.

Analysts from the bank said that the liquidation generated approximately $119 million in gross proceeds. This came up to around $105 million in net proceeds after $14 million in liquidation-related costs. This will mean a loss worth $87million to the CMBS trust that reflects a 45% severity rate.

BofA Merrill analysts said that the sale price at liquidation was relatively in line with the updated $104.7 million appraisal amount as of November 2010. This 2010 figure is close to a 60% reduction versus the original appraisal worth $255 million.

According to analysts, the considerable appraisal reduction reflected the significantly weak cash flow then. The loan sponsors failed to carry out considerable renovations to the aparment buildings while de-regulating the portfolio's rent-controlled and rent-stabilized units to boost income and meet debt service payments.

They said that at the time of origination, more than 90% of units were rent-controlled or rent-stabilized. The venture wanted to limit this total to around 40% by the end of 2012.

When future NOI growth targets did not materialize, loan reserves were utilized to meet debt service payments on the loan until July 2010, when these ran out. As of March 2010, the loan's reported debt service coverage was merely 0.13x, BofA Merrill analysts noted.

As a result of all of these, the CMBS trust will take an $87 million loss, which will cause the deal's L through P tranches to be written down to a principal balance of $0, analysts stated.

Meanwhile, the K tranche, which was originally rated 'BBB-', will also have a partial writedown worth $42 million. These losses total roughly 2.5% of the deal balance outstanding as of the previous month. The $105 million in proceeds from the liquidation will be utilized to pay down the A1A class. This would bring down the balance to $721 million from $826 million as of November.

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