NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded one and affirmed 23 classes of GMAC Commercial Mortgage Securities, Inc. commercial mortgage pass-through certificates series 2006-C1. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades are due to a greater certainty of loss expectations on several of the already specially serviced assets, in addition to the transfer of the largest loan in the pool to special servicing.
Fitch modeled losses of 16.8% of the remaining pool; expected losses on the original pool balance total 17.6%, including $120.1 million (6.9% of the original pool balance) in realized losses to date. Fitch has designated 21 loans (39.5%) as Fitch Loans of Concern, which includes eight specially serviced assets (18.3%).
As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 34.7% to $1.13 billion from $1.73 billion at issuance. Per the servicer reporting, six loans (6.1% of the pool) are defeased. Interest shortfalls are currently affecting classes H through Q.
The largest contributor to expected losses is the Design Center of the Americas loan (8% of the pool), which is secured by a 769,268 square foot (sf) showroom property located in Dania Beach, FL. The loan was previously modified in September 2012. The initial decline in performance was mainly due to several tenants (totaling 423,466 sf) vacating the property in the third quarter of 2012. Per the sub-servicer, the borrower continues with the process of converting a portion of the property to general office use and repositioning the asset to enhance its value. As of the July 2014 rent roll, the property is 53% occupied with average rent at $32 per sf.
The next largest contributor to expected losses is the specially-serviced DDR Macquarie Mervyn's Portfolio loan (4.3%), which was originally secured by 35 single-tenanted retail properties located in California, Nevada, Arizona, and Texas, of which seven currently remain. The collateral was originally 100% leased by Mervyn's under 20-year leases; however, the tenant subsequently filed for Chapter 11 bankruptcy relief, and rejected and vacated each of the stores. To date, 28 properties have been released and seven are real estate owned (REO). The remaining seven properties, which in some cases have been repositioned for multi-tenant use, are collectively 50.4% leased. All reserves have been previously depleted and proceeds from the sale of properties and previous funds held in reserve have been used to reduce the outstanding principal.
The loan is split into three pari passu notes, including the fixed-rate A-2 note in this transaction, the fixed-rate A-1 note ($47.2 million) securitized in the GE 2005-C4 transaction (not rated by Fitch) and the floating-rate A-3 note ($7.6 million) securitized in the COMM 2005-FL11 transaction.
The third largest contributor to expected losses is the specially-serviced Newburgh Mall loan (2.7%), which is secured by a 386,075 sf regional mall located in Newburgh, NY. The loan remains specially serviced since November 2011 when it transferred as a result of the borrower's request for a loan modification. Per the special servicer, lease renewal discussions are on-going with Sears, and Office Depot will remain at the property. Per the July 2014 rent roll, the mall is 90% occupied. The special servicer anticipates the foreclosure sale will occur in September 2014.
Rating Outlooks on classes A-4 through A-1A remain Stable due to increasing credit enhancement and continued paydown. Ratings on the distressed classes may be subject to further downgrades should workout strategies on the existing specially serviced assets fail to stabilize performance.
Fitch downgrades the following classes and assigns or revises Rating Outlooks as indicated:
-- $169.7 million class A-M to 'BBsf' from 'BBBsf', Outlook to Stable from Negative.
Fitch affirms the following classes but assigns or revises REs as indicated:
-- $114.6 million class A-J at 'CCsf', RE 35%.
Fitch affirms the following classes as indicated:
-- $525.7 million class A-4 at 'AAAsf', Outlook Stable;
-- $181.9 million class A-1A at 'AAAsf', Outlook Stable;
-- $36.1 million class B at 'CCsf', RE 35%;
-- $19.1 million class C at 'Csf', RE 0%;
-- $12.7 million class D at 'Csf', RE 0%;
-- $21.2 million class E at 'Csf', RE 0%;
-- $15.6 million class F at 'Csf', RE 0% ;
-- $0 class G at 'Dsf', RE 0%;
-- $0 class H at 'Dsf', RE 0%;
-- $0 class J at 'Dsf', RE 0%;
-- $0 class K at 'Dsf', RE 0%;
-- $0 class L at 'Dsf', RE 0%;
-- $0 class M at 'Dsf', RE 0%;
-- $0 class N at 'Dsf', RE 0%;
-- $0 class O at 'Dsf', RE 0%;
-- $0 class P at 'Dsf', RE 0%;
-- $5.1 million class FNB-1 at 'Bsf', Outlook Negative;
-- $5.6 million class FNB-2 at 'Bsf', Outlook Negative;
-- $2.1 million class FNB-3 at 'CCCsf', RE 100%;
-- $4.5 million class FNB-4 at 'CCCsf', RE 100%;
-- $2.4 million class FNB-5 at 'CCCsf', RE 100%;
-- $13.3 million class FNB-6 at 'CCCsf', RE 95%.
The class A-1, A-1D, A-2 and A-3 certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the ratings on the interest-only class XP and XC certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 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' (May 20, 2014);
-- 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Global Structured Finance Rating Criteria