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Rating Action:

Moody's Affirms Eight and Downgrades Five Classes of BACM 2005-3

05 Feb 2016

Approximately $399 Million of Structured Securities Affected

New York, February 05, 2016 -- Moody's Investors Service has affirmed the ratings on eight classes and downgraded the ratings on five classes in Banc of America Commercial Mortgage Inc. Commercial Mortgage Pass-Through Certificates, Series 2005-3 as follows:

Cl. A-M, Downgraded to Ba2 (sf); previously on Feb 26, 2015 Affirmed Ba1 (sf)

Cl. A-J, Downgraded to Caa2 (sf); previously on Feb 26, 2015 Affirmed Caa1 (sf)

Cl. B, Downgraded to Caa3 (sf); previously on Feb 26, 2015 Affirmed Caa2 (sf)

Cl. C, Downgraded to C (sf); previously on Feb 26, 2015 Affirmed Caa3 (sf)

Cl. D, Affirmed C (sf); previously on Feb 26, 2015 Affirmed C (sf)

Cl. E, Affirmed C (sf); previously on Feb 26, 2015 Affirmed C (sf)

Cl. F, Affirmed C (sf); previously on Feb 26, 2015 Affirmed C (sf)

Cl. G, Affirmed C (sf); previously on Feb 26, 2015 Affirmed C (sf)

Cl. H, Affirmed C (sf); previously on Feb 26, 2015 Affirmed C (sf)

Cl. J, Affirmed C (sf); previously on Feb 26, 2015 Affirmed C (sf)

Cl. K, Affirmed C (sf); previously on Feb 26, 2015 Affirmed C (sf)

Cl. L, Affirmed C (sf); previously on Feb 26, 2015 Affirmed C (sf)

Cl. XC, Downgraded to Caa3 (sf); previously on Feb 26, 2015 Affirmed B2 (sf)

RATINGS RATIONALE

The ratings on four P&I classes were downgraded due to higher anticipated losses from specially serviced loans. As of the January 2016 remittance statement, 90% of the pool is in special servicing and REO assets represents approximately 94% of these loans by balance.

The ratings on eight P&I classes were affirmed because the ratings are consistent with Moody's expected loss.

The rating on the IO Class (Class XC) was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes.

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 paydowns 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 principal methodology used in these ratings was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in October 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Moody's analysis incorporated a loss and recovery approach in rating the P&I classes in this deal since 90% of the pool is in special servicing and there is only one performing loan, which represents 10% of the pool. In this approach, Moody's determines a probability of default for each specially serviced loan that it expects will generate a loss and estimates a loss given default based on a review of broker's opinions of value (if available), other information from the special servicer, available market data and Moody's internal data. The loss given default for each loan also takes into consideration repayment of servicer advances to date, estimated future advances and closing costs. Translating the probability of default and loss given default into an expected loss estimate, Moody's then applies the aggregate loss from specially serviced loans to the most junior classes and the recovery as a pay down of principal to the most senior classes.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based Large Loan Model. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining 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 January 11, 2016 distribution date, the transaction's aggregate certificate balance has decreased by 82% to $399 million from $2.16 billion at securitization. The certificates are collateralized by 13 mortgage loans ranging in size from less than 1% to 29% of the pool.

One loan, constituting 10% of the pool, is 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, contributing to a total certificate loss of $66.7 million (for an average loss severity of 19%). Twelve loans, constituting 90% of the pool, are currently in special servicing. The largest specially serviced loan is the Marley Station Loan ($114 million -- 29% 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 after the company's bankruptcy. 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 December 2015, the mall was 74% occupied (excluding anchor tenants).

The second largest specially serviced loan is the Fiesta Mall ($83.3 million -- 20.9%), which is secured by 309,000 square foot (SF) in a 933,000 SF regional mall located in Mesa, Arizona. The property is shadowed anchored by Dillard's, Sears and Best Buy. Macy's closed its store at the property in 2014. The loan transferred to special servicing in February 2013 due to imminent monetary default relating to tenancy issues. The property has been REO since September 2013 and Mesa is saturated with five malls located within a 13 mile radius.

The third largest specially serviced loan is the FRI Portfolio ($60.1 million -- 15.1%), 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 and the proceeds were applied to the loan balance and outstanding advances. The remaining collateral property, Concourse Towers, has been REO since May 2013.

The remaining nine specially serviced loans are secured by a mix of property type. Moody's estimates an aggregate $294.4 million loss for specially serviced loans (82% expected loss on average).

The only remaining performing loan is the Mercantile West Loan ($41.0 million -- 10.3% of the pool), which is secured by a grocery anchored retail center located in Ladera Ranch, California. The center is anchored by a Pavilions grocery store with a lease thorugh 2019. As of October 2015, the property was 96% leased, compared to 94% as of year-end 2014. Moody's LTV and stressed DSCR are 93% and 1.06X, respectively, compared to 106% and 0.93X at the last review. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

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.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Benjamin Abrams
Associate 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

Matthew Halpern
Asst Vice President - Analyst
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 Eight and Downgrades Five Classes of BACM 2005-3
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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