CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded two classes and affirmed 13 classes of Bank of America Commercial Mortgage Inc. (BACM) commercial mortgage pass-through certificates series 2006-3 due to increased expected losses on the specially serviced loans and performance declines in many of the performing loans. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
Fitch modeled losses of 12.7% of the remaining pool; expected losses on the original pool balance total 16.3%, including $133.6 million (6.8% of the original pool balance) in realized losses to date. Fitch has designated 29 loans (49.4%) as Fitch Loans of Concern, which includes nine specially serviced assets (15%).
As of the September 2014 distribution date, the pool's aggregate principal balance has been reduced by 25.4% to $1.47 billion from $1.96 billion at issuance. Per the servicer reporting, two loans (8.2% of the pool) are defeased. Interest shortfalls are currently affecting classes A-J through P.
The largest contributor to expected losses is the specially-serviced Rushmore Mall loan (6.4% of the pool), which is secured by a 737,725-sf regional mall located in Rapid City, SD. The loan transferred to special servicing in July 2011. A modification is in the process of being finalized. As of YE 2013 in-line sales fell to approximately $304 psf from $321 at YE 2012 and $336 at issuance.
The second largest contributor to expected losses is the Phoenix Airport Marriott loan (4.1%), which is secured by a 345-room hotel located in Phoenix, AZ, approximately 1.5 miles from the Phoenix International Airport. The property faces strong market competition and has been underperforming. The servicer-reported trailing 12 months (TTM) June 2013 NCF debt service coverage ratio (DSCR) was 0.71x, compared with 1.44x at issuance. The property began to suffer during the economic downturn and has not recovered.
The next largest contributor to expected losses is the Republic Place loan (6.3%), which is secured by a 10-story, 213,475-sf office building located in the CBD of Washington, D.C., approximately two blocks from the White House. The largest tenant, The Nuclear Energy Institute, vacated at its YE 2012 lease expiration, reducing property occupancy to 73.5%. Occupancy has since rebounded to 85% and the borrower completed some significant renovations. An additional 16% of the space rolls within the next year.
Rating Outlooks on classes A-3, A-4 and A-1A remain Stable due to increasing credit enhancement and continued paydown. Rating Outlooks on class A-M remains Negative as further collateral underperformance may lead to a downgrade. Should cash flows deteriorate further on the performing loans, or if realized losses exceed current expectations on the specially serviced loans, downgrades to this class are possible.
Fitch downgrades the following classes and assigns or revises Recovery Estimates (REs) as indicated:
--$196.5 million class A-M to 'BBsf' from 'BBBsf'; Outlook Negative;
--$152.3 million class A-J to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes as indicated:
--$986.4 million class A-4 at 'AAAsf'; Outlook Stable;
--$93.9 million class A-1A at 'AAAsf'; Outlook Stable;
--$36.9 million class B at 'Dsf', RE 0%;
--$0 class C at 'Dsf', RE 0%;
--$0 class D at 'Dsf', RE 0%;
--$0 class E at 'Dsf', RE 0%;
--$0 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%.
Classes A-1, A-2 and A-3 have paid in full. Fitch does not rate the class N, O or P certificates. Fitch previously withdrew the rating on the interest-only class XW certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the December 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 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (December 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria - Effective from 20 May 2014 to 4 August 2014
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria