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Rating Action:

Moody's Affirms 15 and Upgrades One Class of BACM 2005-3

26 Feb 2015

Approximately $1.2 Billion of Structured Securities Affected

New York, February 26, 2015 -- Moody's Investors Service affirmed the ratings of 15 classes and upgraded one class of Banc of America Commercial Mortgage Inc. Commercial Mortgage Pass-Through Certificates, Series 2005-3 as follows:

Cl. A-3A, Affirmed Aaa (sf); previously on Mar 19, 2014 Affirmed Aaa (sf)

Cl. A-3B, Affirmed Aaa (sf); previously on Mar 19, 2014 Affirmed Aaa (sf)

Cl. A-4, Upgraded to Aaa (sf); previously on Mar 19, 2014 Affirmed Aa3 (sf)

Cl. A-M, Affirmed Ba1 (sf); previously on Mar 19, 2014 Affirmed Ba1 (sf)

Cl. A-J, Affirmed Caa1 (sf); previously on Mar 19, 2014 Affirmed Caa1 (sf)

Cl. B, Affirmed Caa2 (sf); previously on Mar 19, 2014 Affirmed Caa2 (sf)

Cl. C, Affirmed Caa3 (sf); previously on Mar 19, 2014 Affirmed Caa3 (sf)

Cl. D, Affirmed C (sf); previously on Mar 19, 2014 Downgraded to C (sf)

Cl. E, Affirmed C (sf); previously on Mar 19, 2014 Downgraded to C (sf)

Cl. F, Affirmed C (sf); previously on Mar 19, 2014 Downgraded to C (sf)

Cl. G, Affirmed C (sf); previously on Mar 19, 2014 Affirmed C (sf)

Cl. H, Affirmed C (sf); previously on Mar 19, 2014 Affirmed C (sf)

Cl. J, Affirmed C (sf); previously on Mar 19, 2014 Affirmed C (sf)

Cl. K, Affirmed C (sf); previously on Mar 19, 2014 Affirmed C (sf)

Cl. L, Affirmed C (sf); previously on Mar 19, 2014 Affirmed C (sf)

Cl. XC, Affirmed B2 (sf); previously on Mar 19, 2014 Affirmed B2 (sf)

RATINGS RATIONALE

The ratings on P&I Classes A-3A, A-3B and A-M were affirmed because the transactions key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (HERF), are within acceptable ranges. The ratings on P&I Classes A-J through L were affirmed because the ratings are consistent with Moody's expected loss.

The rating on Class A-4 was upgraded because of an increase in credit support resulting from loan pay downs and amortization and Moody's expectation of increased credit support resulting from the payoff of loans approaching maturity that are well position to refinance. The pool has paid down 16% since last review. In addition, 58% of loans that are scheduled to mature within the next six months have debt yields greater than 10%.

The rating on the IO Class, Class XC was affirmed based on the credit performance (or the weighted average rating factor or WARF) of its referenced classes.

Moody's rating action reflects a base expected loss of 24.4% of the current balance compared to 19.1% at Moody's last review. Moody's base expected loss plus realized losses is now 17.2% of the original pooled balance compared to 16.2% at last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan pay downs or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in this rating were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in December 2014 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model, which it uses for both conduit and fusion transactions. Credit enhancement levels for conduit loans are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Moody's fuses the conduit results with the results of its analysis of investment grade structured credit assessed loans and any conduit loan that represents 10% or greater of the current pool balance.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 13 compared to 18 at Moody's last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level LTV rations. Major adjustments to detrmining proceeds include leverage, loan structure, property type and sponsorship. moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

DEAL PERFORMANCE

As of the February 10, 2015 distribution date, the transaction's aggregate certificate balance has decreased by 42% to $1.2 billion from $2.2 billion at securitization. The certificates are collateralized by 65 mortgage loans ranging in size from less than 1% to 16% of the pool, with the top ten loans constituting 65% of the pool. Ten loans, constituting 9% of the pool, have defeased and are secured by US government securities.

Fourteen loans, constituting 36% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

Fourteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $66.7 million (for an average loss severity of 21%). Eleven loans, constituting 30% of the pool, are currently in special servicing. The largest specially serviced loan is the Marley Station Loan ($114.4 million -- 9.2% of the pool), which is secured by a two-story regional mall located in Glen Burnie, Maryland. The center is anchored by Sears, J.C. Penney and Macy's. Boscov's was the fourth anchor, however the retailer vacated the premise after the company's bankruptcy and the space is currently occupied by Ainet. The loan transferred to special servicing in April 2012 due to imminent monetary default and became real estate owned (REO) in January 2014. As of September 2014, occupancy was 86% with near term rollover risk.

The second largest specially serviced loan is the Fiesta Mall ($83.3 million -- 6.7%), which is secured by 309,092 square foot (SF) in a 1 million SF regional mall located in Mesa, Arizona. The property is shadowed anchored by Dillard's, Sears and Best Buy. Macy's closed its store in 2014, potentially triggering co-tenancy clauses. The loan transferred to special servicing in February 2013 due to imminent monetary default relating to tenancy issues. Mesa is saturated with five malls located within a 13 mile radius. This property holds redevelopment potential with the highest and best use not as a mall.

The third largest specially serviced loan is the FRI Portfolio ($60.1 million -- 4.8%), which was originally secured by two office buildings, Regions Center and Concourse Towers, located in Nashville, Tennessee and West Palm Beach, Florida, respectively. Regions Center was sold in September 2013 for $14.5 million, paying down the loan about $9.9 million. Concourse Towers is currently REO.

The remaining eight specially serviced loans are secured by a mix of property types. Moody's estimates an aggregate $260.2 million loss for the specially serviced loans (70% expected loss on average).

Moody's has assumed a high default probability for four poorly performing loans, constituting less than 2% of the pool, and has estimated an aggregate loss of $3.4 million (a 15% expected loss based on a 50% probability default) from these troubled loans.

Moody's received full year 2013 operating results for 87% of the pool and partial year 2014 operating results for 86% of the pool. Moody's weighted average conduit LTV is 97%, the same as at last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 6% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.5%.

Moody's actual and stressed conduit DSCRs are 1.46X and 1.17X, respectively, compared to 1.49X and 1.16X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The top three performing loans represent 34% of the pool. The largest loan is the Woolworth Building Loan ($200.0 million -- 16.0% of the pool), which is secured by an 811,791 SF Class B office building located in the downtown city hall submarket of New York City. The property is also encumbered by a $50.0 million junior loan. As of November 2014, the property was 96% leased, the same as at last review. Moody's value is based on a long-term stabilized value. Moody's LTV and stressed DSCR are 112% and 0.82X, respectively, the same as at last review.

The second largest loan is the Ridgedale Center Loan ($153.5 million -- 12.3% of the pool), which is secured by a 340,800 SF regional mall located in Minnetonka, Minnesota. The loan is owned by an affiliate of General Growth Properties, Inc. (GGP) and is anchored by Sears, JC Penney and Macy's. As of September 2014, mall occupancy was 85% compared to 93% at last review. As of the trailing 12-month period ending September 2014, total in-line sales were $477 per square foot (PSF) compared to $499 PSF at last review. Nordstrom is building a 140,000 SF store and Macy's added 80,000 SF to their existing store. During this mall expansion and renovation, the property is adjusting the tenant roster, impacting occupancy and tenant sales achievement on a near-term basis. This loan is subject to a 1% liquidation fee at maturity because it was previously in special servicing. Moody's LTV and stressed DSCR are 124% and 0.77X, respectively, compared to 121% and 0.78X at last review.

The third largest loan is the IPC Louisville Portfolio Loan ($65.6 million -- 5.3% of the pool), which is secured by eight properties located in Louisville, KY (6), Manchester, NH (1) and Worcester, MA (1). The eight properties are part of a larger 3.5 million SF portfolio that was purchased by IPC (US), Inc. in May 1998, some of which are also included in this transaction. As of January 2014, the portfolio was 85% leased compared to 77% as of December 2012. Moody's LTV and stressed DSCR 78% and 1.32X, respectively, compared to 100% and 1.03X at last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Gregory Reed
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Annelise Osborne
VP - Sr Credit Officer/Manager
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms 15 and Upgrades One Class of BACM 2005-3
No Related Data.
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