NEW YORK--(BUSINESS WIRE)--Fitch Ratings upgrades one class of GMAC Commercial Mortgage Securities, Inc. commercial mortgage pass-through certificates series 2006-C1. A full list of rating actions follows at the end of this ratings action commentary.
KEY RATING DRIVERS
The upgrade is a result of increased credit enhancement due to additional paydown from loan maturities and additional defeasance since Fitch's last rating action. Fitch modeled losses of 22.4% of the remaining pool; expected losses on the original pool balance total 17%, including $120.4 million (7% of the original pool balance) in realized losses to date. Fitch has designated 19 Fitch Loans of Concern (38.9%), which includes six specially serviced assets (24.2%).
As of the July 2015 distribution date, the pool's aggregate principal balance has been reduced by 55.1% to $776.2 million from $1.73 billion at issuance. Per the servicer reporting, 11 loans (14% of the pool) are defeased. Interest shortfalls are currently affecting classes A-J through Q.
The largest contributor to expected losses is the Design Center of the Americas loan (11.3% of the pool), which is secured by a 777,126 square foot (sf) showroom property located in Dania Beach, FL. The loan was previously modified in September 2012. The initial decline in performance began in the third quarter 2012 (3Q12) when occupancy declined 54% due to several tenants totaling 423,466 sf vacating the property. The borrower has been successful in converting former showroom space to office space. The property is 66% occupied as of June 2015, with average rent $24.33. There is approximately 3% upcoming rollover in 2015 and 19% in 2016. The most recently reported debt-service coverage ratio (DSCR) is 0.85x as of June 2014. The loan matures Aug. 1, 2017.
The loan is split into two pari passu notes, including the fixed-rate A-2 note in this transaction and the fixed-rate A-1 note ($87.7 million) securitized in the GECMC 2005-C4 transaction (not rated by Fitch).
The next largest contributor to expected losses is the specially-serviced James Center loan (12.9%), which is secured by three adjacent class A office buildings totaling approximately one million sf in the CBD of Richmond, VA. It was transferred to the special servicer in June 2014 for imminent default due to a major tenant vacating. The largest tenant, McGuireWoods, LLP, occupies 25% of the net rentable area (NRA) and has a lease expiration in August 2015, upon which the tenant will vacate. McGuireWoods, LLP accounts for approximately 30% of the property's total base revenue. The second and third largest tenants, Wells Fargo Bank, N.A. (16% of NRA) and Davenport & Company, LLC (8% of NRA), are both on long-term leases through February 2020 and January 2022, respectively. The servicer reports they are currently negotiating a loan modification with the borrower which may include an A/B structure with additional terms and new equity being invested into the property by the borrower. The loan matures Jan. 1, 2016. As of December 2014, the DSCR was reported to be 1.52x. The property is currently 89.4% occupied as of June 2015. There is approximately 29% upcoming rollover in 2015 and 7% in 2016. Per REIS as of 2Q15, the Richmond Metro market vacancy is 13.5% with average asking rent $18.65/sf.
The loan is split into two pari passu notes, including the fixed-rate A-1 note in this transaction and the fixed-rate A-2 note ($50 million) securitized in the GECMC 2006-C1 transaction.
The third largest contributor to expected losses is the specially-serviced Newburgh Mall (3.8%), a 386,075 sf regional mall located in Newburgh, NY anchored by Sears, The Bon-Ton, Bed, Bath & Beyond, and Office Depot with lease expirations in 2019, 2018, 2020, and 2017; respectively. The mall includes other specialty retailers such as Avenue, Children's Place, Foot Locker, FYE, and New York & Co. Sears lease expired in November 2014 and have renewed through November 2020. The loan transferred to the special servicer in November 2011 and is currently real estate owned (REO). The mall is 90.5% occupied as of June 2015.
RATING SENSITIVITIES
Rating Outlooks on classes A-4, A-1A, and AM remain Stable due to increasing credit enhancement and continued paydown. Ratings on the distressed classes may be subject to further downgrades as losses are realized.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded the following rating:
--$169.7 million class A-M to 'BBB-sf' from 'BBsf'; Outlook Stable.
Fitch affirms the following class and assigns or revises REs as indicated:
--$114.6 million class A-J at 'CCsf'; RE 45%.
Fitch affirms the following classes as indicated:
--$217.6 million class A-4 at 'AAAsf'; Outlook Stable;
--$169.7 million class A-1A at 'AAAsf'; Outlook Stable;
--$36.1 million class B at 'CCsf'; RE 0%;
--$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%;
--$15.4 million class F at 'Dsf'; 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%.
The class A-1, A-1D, A-2, A-3, FNB-1, FNB-2, FNB-3, FNB-4, FNB-5 and FNB-6 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 is available at www.fitchratings.com.
Applicable Criteria
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989977
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989977
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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