Approximately $70.3 Million of Structured Securities Affected
New York, February 07, 2013 -- Moody's Investors Service (Moody's) affirms the ratings of ten classes
and downgrades the rating of one class of GMAC Commercial Mortgage Securities,
Inc., Series 2002-C3 Mortgage Pass-Through
Certificate as follows:
Cl. F, Affirmed Aa3 (sf); previously on Sep 25,
2008 Upgraded to Aa3 (sf)
Cl. G, Affirmed Baa3 (sf); previously on Feb 16,
2012 Downgraded to Baa3 (sf)
Cl. H, Affirmed Ba1 (sf); previously on Feb 16,
2012 Downgraded to Ba1 (sf)
Cl. J, Affirmed B3 (sf); previously on Feb 16,
2012 Downgraded to B3 (sf)
Cl. K, Affirmed Caa2 (sf); previously on Feb 16,
2012 Downgraded to Caa2 (sf)
Cl. L, Affirmed Caa3 (sf); previously on Feb 16,
2012 Downgraded to Caa3 (sf)
Cl. M, Affirmed Ca (sf); previously on Feb 16,
2012 Downgraded to Ca (sf)
Cl. N, Affirmed C (sf); previously on Feb 16,
2012 Downgraded to C (sf)
Cl. O-1, Affirmed C (sf); previously on Dec 2,
2010 Downgraded to C (sf)
Cl. O-2, Affirmed C (sf); previously on Dec 2,
2010 Downgraded to C (sf)
Cl. X-1, Downgraded to Caa2 (sf); previously
on Feb 22, 2012 Downgraded to Ba3 (sf)
RATINGS RATIONALE
The affirmations of the principal classes are due to key parameters,
including Moody's loan to value (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.
The downgrade of the IO Class, Class X-1, is due to
significant payoffs since last review and is based on the ratings of its
remaining referenced classes.
Moody's rating action reflects a cumulative base expected loss of 39.7%
of the current balance. At last review, Moody's cumulative
base expected loss was 4.6%. Moody's base expected
loss plus realized loss is 5.4%, compared to 4.7%
at last review, of original balance. Moody's provides a current
list of base expected 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.
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. From
time to time, Moody's may, if warranted, change these
expectations. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker than
Moody's had anticipated when the related securities ratings were issued.
Even so, a deviation from the expected range will not necessarily
result in a rating action nor does performance within expectations preclude
such actions. The decision to take (or not take) a rating action
is dependent on an assessment of a range of factors including, but
not exclusively, the performance metrics.
Primary sources of assumption uncertainty are the extent of growth in
the current macroeconomic environment given the weak pace of recovery
and commercial real estate property markets. Commercial real estate
property values are continuing to move in a modestly positive direction
along with a rise in investment activity and stabilization in core property
type performance. Limited new construction and moderate job growth
have aided this improvement. However, a consistent upward
trend will not be evident until the volume of investment activity steadily
increases for a significant period, non-performing properties
are cleared from the pipeline, and fears of a Euro area recession
are abated.
The hotel sector is performing strongly with nine straight quarters of
growth and the multifamily sector continues to show increases in demand
with a growing renter base and declining home ownership. Recovery
in the office sector continues at a measured pace with minimal additions
to supply. However, office demand is closely tied to employment,
where growth remains slow and employers are considering decreases in the
leased space per employee. Also, primary urban markets are
outperforming secondary suburban markets. Performance in the retail
sector continues to be mixed with retail rents declining for the past
four years, weak demand for new space and lackluster sales driven
by internet sales growth. Across all property sectors, the
availability of debt capital continues to improve with robust securitization
activity of commercial real estate loans supported by a monetary policy
of low interest rates.
Moody's central global macroeconomic scenario is for continued below-trend
growth in US GDP over the near term, with consumer spending remaining
soft in the US. Hurricane Sandy may skew near-term economic
data but is unlikely to have any long-term macroeconomic effects.
Primary downside risks include: a deeper than expected recession
in the euro area accompanied by deeper credit contraction; the potential
for a hard landing in major emerging markets, including China,
India and Brazil; an oil supply shock; albeit abated in recent
months; and given recent political gridlock, excessive fiscal
tightening in the US in 2013 leading the US into recession. However,
the Federal Reserve has shown signs of support for activity by continuing
with quantitative easing.
The methodologies used in this rating were "Moody's Approach to Rating
U.S. CMBS Conduit Transactions" published in September 2000,
and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000. The methodology used in rating Interest-Only
Securities was "Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in February 2012. The Interest-Only
Methodology was used for the rating of X-1. Please see the
Credit Policy page on www.moodys.com for a copy of these
methodologies.
On November 22, 2011 Moody's released a Request for Comment,
in which the rating agency has requested market feedback on potential
changes to its rating methodology for Interest-Only Securities.
If the revised methodology is implemented as proposed, the ratings
on GMAC Commercial Mortgage Securities, Inc., Series
2002-C3 Mortgage Pass-Through Certificates, Class
X-1 may be negatively affected. Please refer to Moody's
request for Comment, titled "Proposal Changing the Global Rating
Methodology for Structured Finance Interest-Only Securities,"
for further details regarding the implications of the proposed methodology
change on Moody's rating. Please see the Credit Policy page on
www.moodys.com for a copy of the Request for Comment.
Moody's review incorporated the use of the excel-based CMBS Conduit
Model v 2.62 which is used for both conduit and fusion transactions.
Conduit model results at the Aa2 (sf) 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 (sf) 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement
into an overall model result. Fusion loan credit enhancement is
based on the credit assessment 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 assessment level,
is incorporated for loans with similar credit assessments in the same
transaction.
The conduit model includes an IO calculator, which uses the following
inputs to calculate the proposed IO rating based on the published methodology:
original and current bond ratings and credit assessments; original
and current bond balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type as defined in the
published methodology. The calculator then returns a calculated
IO rating based on both a target and mid-point. For example,
a target rating basis for a Baa3 (sf) rating is a 610 rating factor.
The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e.
the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf)
rating factor of 940). If the calculated IO rating factor is 700,
the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and
Ba1 (sf) IO indication for consideration by the rating committee.
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 8 compared
to 37 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.5 and then reconciles and
weights the results from the two models in formulating a rating recommendation.
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. These aggregated
proceeds are then further adjusted for any pooling benefits associated
with loan level diversity, other concentrations and correlations.
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 February 16, 2012.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last rating action and the ratings history.
DEAL PERFORMANCE
As of the January 10, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 91% to $70.3
million from $777.4 million at securitization. The
Certificates are collateralized by 12 mortgage loans ranging in size from
less than 1.5% to 16.8% of the pool,
with the top ten non-defeased loans representing 95.3%
of the pool. One loan, representing 3.2% of
the pool, has defeased and is secured by U.S. Government
securities.
Two loans, representing 29.5% 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.
Six loans have been liquidated from the pool, resulting in a realized
loss of $14.3 million (42.8% loss severity).
Currently six loans, representing 62.2% of the pool,
are in special servicing. Moody's estimates an aggregate $25.9
million loss for the specially serviced loans (37% expected loss
on average).
As of the most recent remittance date, the pool has experienced
cumulative interest shortfalls totaling $3.5 million and
affecting Classes P through J. Moody's anticipates that the pool
will continue to experience interest shortfalls caused by specially serviced
loans. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate entitlement
reductions (ASERs), extraordinary trust expenses and nonadvancing
by the master servicer based on a determination of non-recoverability.
The master servicer has made a determination of non-recoverability
for the Nashville Business Center Loan ($9.3 million),
Cherryland Center Loan ($7.6 million) and the Wakefield
Forest Apartments Loan ($3.9 million) and is no longer advancing
on these loans.
Moody's was provided with partial year 2012 operating results for 67%
of the pool and full year 2011 for 75% of the pool. Excluding
specially serviced and troubled loans, Moody's weighted average
LTV is 94% compared to 82% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 12%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.6%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.26X and 1.25X, respectively,
compared to 1.41X and 1.35X 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 loans represent 31.4% of the pool.
The largest loan is the Parkway Manor Apartments Loan ($11.8
million -- 16.8% of the pool), which is secured
by a 176 unit garden-style multifamily complex located in Carson
City, NV. Moody's LTV and stressed DSCR are 112.1%
and 0.89X, respectively, compared to 114.7%
and 0.87X at last review. This loan is currently on the
Watchlist due to low DSCR and loan maturity. The loan matured on
12/1/2012 and borrower is currently requesting an extension.
The second largest loan is the Hyatt Place, formerly known as Holiday
Inn Select, ($8.9 million -- 12.7%
of the pool), and is secured by a 170 room hotel located in New
Orleans, LA. As of December 2012, the property had
an occupancy rate, ADR and RevPar of 65.8%,
128.85 and 84.81 respectively, compared to 39.6%,
110.62 and 43.76 in 2011. Moody's LTV and stressed
DSCR are 84.4% and 1.47X respectively, compared
to 92.7% and 1.34X at last review. This loan
was recently returned from the Special Servicer and is currently on the
Watchlist due to upcoming loan maturity on 4/1/2013. The borrower
has indicated that they are working to secure financing in order to payoff
the loan at maturity.
The third largest loan is Walgreens Hattiesburg ($1.3 million
-- 1.9% of the pool), which is secured by a 15,120
SF Walgreens anchored retail property in Haittesburg, MS.
This property has been 100% leased to Walgreens since securitization
and has a lease expiration in April 2059. Moody's LTV and stressed
DSCR are 67.3% and 1.62X, respectively,
compared to 74.1% and 1.47X, at last review.
Walgreens is currently rated Baa1.
REGULATORY DISCLOSURES
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.
In conducting surveillance of this credit, Moody's considered performance
data contained in servicer and remittance reports. Moody's obtains
servicer reports on this transaction on a periodic basis, at least
annually.
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.
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.
Dana Baranaskas
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
Michael Gerdes
MD - Structured Finance
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 Ten Classes and Downgrades One CMBS Class of GMAC 2002-C3
