NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed seven classes of GMAC Commercial Mortgage Securities, Inc., commercial mortgage pass-through certificates, series 2002-C3 (GMAC 2002-C3). A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations reflect concerns as to pool concentration and adverse selection, despite the increased credit enhancement since Fitch's last rating action. The Broadmoor Apartments loan, which was the largest contributor to Fitch-modeled losses at the last rating action, was disposed at better recoveries than previously modeled.
Fitch modeled losses of 43.5% of the remaining pool; expected losses on the original pool balance total 4.5%, including $25.1 million (3.2% of the original pool balance) in realized losses to date.
The pool is extremely concentrated with seven loans remaining, including one loan (34.7% of current pool) which had been modified into an A/B note. Three loans (86.4%) are currently in special servicing, while one loan (4.1%) is defeased. The remaining three non-specially serviced and non-defeased loans are fully amortizing and secured by single-tenanted Walgreen's properties located in Savannah, GA; Hattiesburg, MS; and Madison, MS.
As of the February 2016 distribution date, the pool's aggregate principal balance has been reduced by 97.1% to $22.5 million from $777.4 million at issuance. Interest shortfalls are currently affecting classes K through P.
The largest contributor to Fitch-modeled losses is the largest loan in the pool, Nashville Business Center (34.7% of pool). The loan is secured by an 893,170 square foot (sf) industrial facility located in Murfreesboro, TN.
The loan was first transferred to special servicing in November 2011 for monetary default after a major tenant, Vi-Jon (a private health care and beauty manufacturer) which initially occupied 50% of the net rentable area (NRA), vacated at its May 2010 lease expiration. In September 2013, a modification was granted whereby the loan was bifurcated into a $9.16 million A-note and $3.55 million B-note, the loan was converted to interest-only for the remaining term, and the maturity date was extended to July 2014, with two additional one-year extension options through July 2016 if certain criteria were met. The borrower paid $500,000 in new equity, of which $400,000 was contributed to a tenant improvement/leasing commission reserve and $100,000 was used to set up a debt servicer/operating expense reserve. The loan transferred back to the master servicer in March 2014.
The loan was transferred back to the special servicer for a second time in August 2015 due to concerns by the master servicer over the leasing benchmarks established under the prior modified loan documents. As of the December 2015 rent roll, the property was 75% occupied compared to 69% one year earlier. The largest tenant, Store Opening Solutions, Inc., executed a lease amendment, effective Jan. 1, 2016, to expand the amount of occupied square footage to 380,000 sf (42.5% of NRA) from 200,000 sf with an option to lease 'on demand' an additional 147,100 sf (16.5% of NRA). The tenant's lease expires in December 2018; however, any additional space that is leased under the optional space provision would be month-to-month.
The annualized year-to-date September 2015 net operating income has increased by 157% from 2014 due to new leasing at the property. Two new leases were executed, including one during fourth quarter 2014 and one during second quarter 2015, for 25.2% and 7.5% of the NRA, respectively, with lease expirations in November 2017 and May 2018.
The next largest contributor to Fitch-modeled losses is the specially serviced Lake Park Pointe Shopping Center loan (31.8% of pool). The loan, which is secured by a 78,088 sf retail property located in Chicago, IL, was transferred to special servicing in April 2012 for monetary default. The prior largest tenant, Michael's Fresh Markets (previously 53% of the NRA), filed Chapter 11 bankruptcy and vacated. A portion of this space was re-tenanted by Ross Dress for Less (34% of the NRA) in November 2013. Multiple forbearance agreements have already been granted to the borrower, including prior ones that had expired in December 2012, March 2013, December 2013, and March 2014. The borrower is now in its fifth forbearance, which expires in April 2016, but has the option to extend to July 2016, to allow for time to complete refinancing. As of the August 2015 rent roll, the property was 82.6% occupied. Lease rollover in 2016 consists of 11.5% of the NRA.
The third largest contributor to Fitch-modeled losses is the Vista Office Center asset (19.8% of pool). The asset, which is a 46,596 sf office property located in Temecula, CA, has the traditional office space component (totaling 37,537 sf), as well as an executive suites component (totaling 9,059 sf). The loan transferred to special servicing in October 2012 due to imminent default. The asset became real estate-owned in June 2013. As of the December 2015 rent roll, the overall property was 71.7% occupied with the traditional office space component being 70.5% occupied and the executive suites component 76.7% occupied. The property competes poorly with other properties in the area due to a large, vacant and outdated lobby. The special servicer indicates they are working on finalizing a large lease at the property and expects to list the asset for sale shortly afterwards.
RATING SENSITIVITIES
The Rating Outlook on class J was revised to Stable from Negative due to increasing credit enhancement and expected continued paydowns. A further upgrade was not warranted given the adverse selection of the remaining pool with no near-term loan maturities and no expected near-term resolutions of the specially serviced assets. Distressed classes (those rated below 'Bsf') may be subject to future downgrades should collateral performance continue to decline, expected losses increase, as losses are realized, or if realized losses are greater than Fitch's expectations.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed and revised Rating Outlooks on the following classes as indicated:
--$2.8 million class J at 'Bsf'; Outlook to Stable from Negative;
--$8.7 million class K at 'CCCsf'; RE 100%;
--$5.8 million class L at 'CCsf'; RE 0%;
--$4.9 million class M at 'Csf'; RE 0%;
--$210,439 class N at 'Dsf'; RE 0%;
--$0 class O-1 at 'Dsf'; RE 0%;
--$0 class O-2 at 'Dsf'; RE 0%.
The class A-1, A-2, B, C, D, E, F, G and H certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 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. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1000360
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1000360
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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