2009-11-23 17:26:05 -
Fitch Ratings takes various actions on GE Commercial Mortgage Corporation, series 2005-C3 commercial mortgage pass-through certificates, including downgrades of 14 classes. A detailed list of rating actions follows at the end of this release.
The downgrades are the result of Fitch's loss expectations and its prospective views regarding cash flow declines and commercial real estate market values. Fitch forecasts potential losses
of 4.7% for this transaction, should market conditions not recover. Today's rating actions are based on the full losses of 4.2% as a majority of loans mature in the next five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future.
To determine potential defaults for each loan, Fitch assumed cash flow would decline by 10% from year-end 2008. That is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three-year period. If the stressed cash flow would cause the loan to fall below 0.95 times (x) DSCR, Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow and applied a market cap rate by property type, ranging between 7.5% and 10%, to derive a value. If the loan balance at default is less than Fitch's derived value, the loan would realize that amount of loss.
These loss estimates were reviewed in more detail for loans representing 59.7% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Loss expectations attributed to loans reviewed in detail represent approximately 82% of the 4.7%.
Approximately 38.5% of the mortgages mature within the next five years as follows: 28.1% in 2010, 0% in 2011, 10.4% in 2012, 0% in 2013, and 0% in 2014. All losses associated with these loans are fully recognized in the rating actions.
Fitch identified 15 Loans of Concern (16.8%) within the pool, four of which (6.5%) are specially serviced, three of which are current (6.3%) and one (0.1%) that is 90-days delinquent.
Fitch's analysis resulted in loss expectations for four of the top 15 loans. Two of which (7.8%) are assumed to default during the loan term, as the stressed cash flow is below 0.95x DSCR. Two additional loans (5.9%) are assumed to incur losses at maturity based on its balloon loan balance being greater than the implied value of the properties. Fitch expects that ten of the top 15 loans may default at maturity based on an insufficient accrued equity position as calculated in Fitch's refinance test; however, Fitch's analysis did not result in a loss for these ten loans based on its derived values being higher than the current loan amounts. A loan would pass the refinance test if the stressed cash flow would achieve a 1.25x DSCR as calculated based on a 30 year amortization schedule and an 8% coupon. One loan (7.3%) is expected to payoff at maturity based on its strong performance.
The largest contributors to loss are as follows: One Main Place (3.3%), Garden City Plaza (4.5%) and 12000 Biscayne Office Building (0.6%).
One Main place is secured by a one million sf office building located in downtown Dallas, TX. The servicer-reported June 2009 debt service coverage ratio (DSCR) and occupancy were 0.94x and 71.7%, respectively.
Occupancy at the property has recently dropped due in part to Ernst & Young's non-renewal of their space (10.1%). Based on current performance and anticipated declines, losses are expected prior to the loan's maturity in 2012.
Garden City Plaza is secured by four adjacent, five story office buildings totaling 583,017 sf located in Garden City, NJ. The servicer-reported June 2009 DSCR and occupancy were 0.94x and 88.1% compared to the DSCR and occupancy of 1.20x and 97.4% at issuance. The subject's performance has declined due to increases in operating expenses and declines in occupancy.
12000 Biscayne Office Building is secured by a 150,924 sf office building located in Miami, FL. The subject's performance has declined due to a decrease in occupancy. The servicer-reported YE 2008 DSCR and occupancy were 0.96x and 61.0% compared to the DSCR and occupancy of 1.20x and 88.2% at issuance.
Fitch has downgraded, removed from Rating Watch Negative and assigned Rating Outlooks and Loss Severity (LS) ratings to the following classes.
--$161.4 million class A-J to 'AA/LS3' from 'AAA'; Outlook Stable;
--$13.2 million class B to 'AA/LS5' from 'AA+'; Outlook Negative;
--$29.1 million class C to 'A/LS5' from 'AA'; Outlook Negative;
--$21.2 million class D to 'BBB/LS5' from 'AA-'; Outlook Negative;
--$34.4 million class E to 'BBB-/LS5' from 'A'; Outlook Negative;
--$18.5 million class F to 'BB/LS5' from 'A-'; Outlook Negative;
--$23.8 million class G to 'BB/LS5' from 'BBB+'; Outlook Negative;
--$21.2 million class H to 'B/LS5' from 'BBB'; Outlook Negative;
--$31.7 million class J to 'B-/LS5' from 'BBB-'; Outlook Negative;
--$7.9 million class K to 'B-/LS5' from 'BB+'; Outlook Negative;
--$7.9 million class L to 'B-/LS5' from 'BB'; Outlook Negative;
--$10.6 million class M to 'B-/LS5' from 'BB-'; Outlook Negative;
--$2.6 million class N to 'B-/LS5' from 'B+'; Outlook Negative;
--$7.9 million class O to 'B-/LS5' from 'B'; Outlook Negative.
Also, Fitch affirms and assigns Loss Severity (LS) ratings for the following classes as indicated.
--$31.4 million class A-1 at 'AAA/LS1'; Outlook Stable;
--$117.4 million class A-2 at 'AAA/LS1'; Outlook Stable;
--$180 million class A-3FX at 'AAA/LS1'; Outlook Stable;
--$25 million class A-3FL at 'AAA/LS1'; Outlook Stable;
--$145.4 million class A-4 at 'AAA/LS1'; Outlook Stable;
--$118.2 million class A-5 at 'AAA/LS1'; Outlook Stable;
--$75 million class A-6 at 'AAA/LS1'; Outlook Stable;
--$74.5 million class A-AB at 'AAA/LS1'; Outlook Stable;
--$386.7 million class A-7A at 'AAA/LS1'; Outlook Stable;
--$55.2 million class A-7B at 'AAA/LS1'; Outlook Stable;
--$435.8 million class A-1A at 'AAA/LS1'; Outlook Stable;
--Interest only class X-C at 'AAA'; Outlook Stable;
--Interest only class X-P at 'AAA'; Outlook Stable.
The $7.9 million class P and $23.8 million class Q are not rated by Fitch.
Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the July 8, 2009 report, 'Surveillance Methodology for Recent Vintage U.S. CMBS' which is available at ' www.fitchratings.com :
' under the following headers.
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at ' www.fitchratings.com :
'.
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Fitch RatingsRyan Frank, +1-312-368-3133, ChicagoBritt
Johnson, +1-312-606-2341, ChicagoMedia Relations:Sandro
Scenga, +1-212-908-0278, New York
sandro.scenga@fitchratings.com : mailto:sandro.scenga@fitchratings.com
