Approximately $3.2 Billion of Structured Securities Affected
New York, March 23, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 22 CMBS classes
of Banc of America Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2007-3 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Aug 23, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Aug 23, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2FL, Affirmed at Aaa (sf); previously on
Aug 23, 2007 Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Aug 23, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Aug 23, 2007 Definitive Rating Assigned Aaa (sf)
Cl. XW, Affirmed at Aaa (sf); previously on Aug 23,
2007 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aa3 (sf); previously on
Jan 26, 2010 Downgraded to Aa3 (sf)
Cl. A-5, Affirmed at Aa3 (sf); previously on
Jan 26, 2010 Downgraded to Aa3 (sf)
Cl. A-1A, Affirmed at Aa3 (sf); previously on
Jan 26, 2010 Downgraded to Aa3 (sf)
Cl. A-M, Affirmed at Baa1 (sf); previously on
Jan 26, 2010 Downgraded to Baa1 (sf)
Cl. A-MF, Affirmed at Baa1 (sf); previously on
Jan 26, 2010 Downgraded to Baa1 (sf)
Cl. A-MFL, Affirmed at Baa1 (sf); previously
on Jan 26, 2010 Downgraded to Baa1 (sf)
Cl. A-J, Affirmed at B3 (sf); previously on Jan
26, 2010 Downgraded to B3 (sf)
Cl. B, Affirmed at Caa2 (sf); previously on Jan 26,
2010 Downgraded to Caa2 (sf)
Cl. C, Affirmed at Caa3 (sf); previously on Jan 26,
2010 Downgraded to Caa3 (sf)
Cl. D, Affirmed at Ca (sf); previously on Jan 26,
2010 Downgraded to Ca (sf)
Cl. E, Affirmed at Ca (sf); previously on Jan 26,
2010 Downgraded to Ca (sf)
Cl. F, Affirmed at C (sf); previously on Jan 26,
2010 Downgraded to C (sf)
Cl. G, Affirmed at C (sf); previously on Jan 26,
2010 Downgraded to C (sf)
Cl. H, Affirmed at C (sf); previously on Jan 26,
2010 Downgraded to C (sf)
Cl. J, Affirmed at C (sf); previously on Jan 26,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Jan 26,
2010 Downgraded to C (sf)
RATINGS RATIONALE
The affirmations are due to key parameters, including Moody's
LTV ratio, Moody's stressed debt service coverage ratio (DSCR)
and the Herfindahl Index (Herf), remaining within acceptable ranges.
Based on our current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their current
ratings.
Two notable credit positive events have occurred since last review:
the migration of loans out of special servicing and the payoff of the
pool's third largest loan, One Park Avenue. Currently
there are 14 loans representing 7% of the deal in special servicing
compared to 24 loans representing 27% of the pool at last review.
The One Park Avenue Loan ($187.5 million), was a pari
passu interest in a $375 million first mortgage. At last
review the loan was in special servicing and Moody's had estimated
a significant loss for this loan. In March 2011 Vornado Realty
Trust purchased a 95% stake in One Park Avenue. The sale
proceeds were used to retire the debt. Due to fees, advances
and expenses the loan payoff resulted in a minimal ($1.9
million or 1%) loss. The deal was originally over-collateralized,
so the realized loss to the certificates ($398,000) is less
than the loss from the One Park Avenue Loan payoff. One Park Avenue
is the only loan in the pool that has paid off or been liquidated.
The previously mentioned credit positive events did result in a lowered
base expected loss estimate than at last review. However,
the overall pool quality does not warrant any upgrades at this time.
While the conduit LTV has only increased marginally to 128% from
127% at last review, the pool LTV has increased to 157%
from 127% at last review. Even after excluding specially
serviced and troubled loans, loans representing 85% of the
pool have a stressed DSCR of less than 1.0X. Additionally,
most of the loans that migrated out of special servicing remain on the
servicer's watchlist.
Moody's rating action reflects a cumulative base expected loss of
11.2% of the current balance. At last review,
Moody's cumulative base expected loss was 15.1%.
Moody's stressed scenario loss is 24.6% of the current
balance. Moody's provides a current list of base and stress
scenario losses for conduit and fusion CMBS transactions on moodys.com
at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for investment grade classes could decline below the current levels.
If future performance materially declines, the expected level of
credit enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these
expectations. Performance that falls outside an acceptable range
of the key parameters may indicate that the collateral's credit
quality is stronger or weaker than Moody's had anticipated during
the current review. Even so, deviation from the expected
range will not necessarily result in a rating action. There may
be mitigating or offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to amortization
and loan payoffs or a decline in subordination due to realized losses.
Primary sources of assumption uncertainty are the current sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011. The hotel and multifamily sectors are continuing
to show signs of recovery, while recovery in the office and retail
sectors will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "Moody's Approach to
Rating U.S. CMBS Conduit Transactions," published
September 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR,
and Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit
model results at the B2 level are driven by a paydown analysis based on
the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity,
is a primary determinant of pool level diversity and has a greater impact
on senior certificates. Other concentrations and correlations may
be considered in our analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or determined based
on a multiple or ratio of either of these two data points. For
fusion deals, the credit enhancement for loans with investment-grade
credit estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the credit estimate of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the credit estimate level, is incorporated
for loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan size,
where a higher number represents greater diversity. Loan concentration
has an important bearing on potential rating volatility, including
risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 21
compared to 29 at Moody's prior review.
Moody's ratings are determined by a committee process that considers
both quantitative and qualitative factors. Therefore, the
rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of quantitative
tools -- MOST® (Moody's Surveillance Trends) and CMM
(Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full
review is summarized in a press release dated January 26, 2010.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last rating action and the ratings history.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
DEAL PERFORMANCE
As of the March 10, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 6% to $3.3
billion from $3.5 billion at securitization. The
Certificates are collateralized by 150 mortgage loans ranging in size
from less than 1% to 10% of the pool, with the top
ten loans representing 52% of the pool. The pool does not
contain any defeased loans or loans with credit estimates.
Thirty loans, representing 36% of the pool, are on
the master servicer's watchlist. The watchlist includes loans
which meet certain portfolio review guidelines established as part of
the CRE Finance Council (CREFC) monthly reporting package. As part
of our ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could impact
performance.
There are 14 loans, representing 7% of the pool, in
special servicing. The largest specially serviced loan is the Metropolis
Shopping Center Loan ($86 million -- 3% of the pool),
which is secured by Phase I of a suburban power center located southwest
of Indianapolis, Indiana. The property is also encumbered
by a $9 million B-Note. The property is currently
in foreclosure and the servicer has recognized a $38 million appraisal
reduction for this loan. The remaining 13 specially serviced loans
are secured by a mix of commercial and multifamily properties.
The servicer has recognized a $153 million aggregate appraisal
reduction for 12 of the 14 specially serviced loans and one troubled loan.
Moody's has assumed a high default probability for 18 poorly performing
loans representing 28% of the pool and has estimated an aggregate
$140 million loss (15% expected loss based on a 46%
probability default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 96% and 83% of the pool's loans,
respectively. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 128% compared to 127%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 13% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.6%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.35X and .85X, respectively,
compared to 1.34X and .86X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stressed rate applied to the loan balance.
The top three performing conduit loans represent 21% of the pool
balance. The largest loan is the Presidential Towers Loan ($325.0
million - 10% of the pool), which is secured by four
connected 50-story apartment buildings (2,346 units) located
in the Intown submarket of downtown Chicago, Illinois. As
of January 2010 the multifamily units were 92% leased compared
to 96% at last review. The property's 87,000
square foot (SF) retail component is undergoing renovations, which
is believed to have contributed to the decline in occupancy. The
retail space was only 41% leased as per the January 2011 rent roll.
Property performance is expected to improve as the retail space is leased
up. Moody's LTV and stressed DSCR are 133% and 0.65X,
which is the same as at last review.
The second largest loan is the Renaissance Mayflower Hotel Loan ($200
million -- 6% of the pool), which is secured by a 657-unit
hotel located in Washington, D.C. The loan was being
specially serviced at last review. The loan term was extended by
12 months and the loan was transferred out of special servicing in October
2010. The loan is current. Moody's LTV and stressed DSCR
is 155% and .75X, respectively, compared to
167% and .68X at last review
The third largest loan is the Pacific Shores Building 9 & 10 Loan
($184 million -- 5% of the pool), which is secured
by two Class A office buildings located in a suburban office park in Redwood
City, California. The property serves as Facet Biotech's
corporate headquarters. Abbott Laboratories (A1, stable outlook)
acquired Facet Biotech in April 2010. The property is 100%
leased, which is the same as at last review. Moody's
LTV and stressed DSCR are 145% and .71X, compared
to 160% and .65X at last review.
New York
Peter Simon
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms 22 CMBS Classes of BACM 2007-3
