Approximately $586.2 Million of Structured Securities Affected
New York, September 22, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of four classes
of Banc of America Commercial Mortgage, Inc., Commercial
Mortgage Pass-Through Certificates, Series 2005-3
and placed eight classes on review for possible downgrade as follows:
Cl. A-M, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jul 15, 2005 Definitive Rating Assigned
Cl. A-J, Aa2 (sf) Placed Under Review for Possible
Downgrade; previously on Nov 19, 2009 Downgraded to Aa2 (sf)
Cl. B, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 19, 2009 Downgraded to Aa3 (sf)
Cl. C, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 19, 2009 Downgraded to A1 (sf)
Cl. D, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 19, 2009 Downgraded to A3 (sf)
Cl. E, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 19, 2009 Downgraded to Baa2 (sf)
Cl. F, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 19, 2009 Downgraded to Baa3 (sf)
Cl. G, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 19, 2009 Downgraded to Ba3 (sf)
Cl. H, Downgraded to C (sf); previously on Nov 19,
2009 Downgraded to Caa1 (sf)
Cl. J, Downgraded to C (sf); previously on Nov 19,
2009 Downgraded to Caa3 (sf)
Cl. K, Downgraded to C (sf); previously on Nov 19,
2009 Downgraded to Ca (sf)
Cl. L, Downgraded to C (sf); previously on Nov 19,
2009 Downgraded to Ca (sf)
The downgrades of Classes H through L are due to realized and anticipated
losses from specially serviced loans. The pool has experienced
an aggregate $9.6 million loss on five loans resulting in
a 32% loss for class Class Q. The servicer has recognized
appraisal reductions totaling $165.3 million for 12 loans
currently in special servicing.
Moody's placed Classes D through L on review for possible downgrade due
to higher expected losses for the pool resulting from realized and anticipated
losses from specially serviced and troubled loans.
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 stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010
and 2011; we expect overall a sluggish recovery in most of the world's
largest economies, returning to trend growth rate with elevated
fiscal deficits and persistent unemployment levels.
The principal methodologies used in rating Banc of America Commercial
Mortgage, Inc., Series 2005-3 is "CMBS:
Moody's Approach to Rating Fusion Transactions" dated April, 2005.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
In addition to methodologies and research available on moodys.com,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
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
underlying ratings is melded with the conduit model credit enhancement
into an overall model result. Fusion loan credit enhancement is
based on the underlying rating 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 underlying rating level,
is incorporated for loans with similar underlying ratings in the same
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 November 19, 2009.
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
As of the September 10, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 10% to $1.9
billion from $2.2 billion at securitization. The
Certificates are collateralized by 87 mortgage loans ranging in size from
less than 1% to 10% of the pool, with the top ten
loans representing 57% of the pool. One loan, representing
1% of the pool, has defeased and is now collateralized by
U.S. Government securities.
Twenty-one loans, representing 16% 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
Five loans have been liquidated from the pool, resulting in an aggregate
realized loss of $9.6 million (35% loss severity).
Fourteen loans, representing 21% of the pool, are currently
in special servicing. The largest specially serviced loan is the
Pacific Arts Plaza Loan ($132.0 million -- 6.8%
of the pool), which represents a 54.5% pari passu
interest in a $242.0 million first mortgage loan.
The property is also encumbered by a $28.0 million B Note.
The loan is secured by four office buildings, totaling 825,061
square feet (SF) located in Costa Mesa, California. The loan
was transferred to special servicing in August 2009 and is now in foreclosure.
The second largest specially serviced loan is the FRI Portfolio Loan ($70.0
million -- 3.6% of the pool), which is secured
by two office buildings, totaling 591,189 SF, located
in Nashville, Tennessee and West Palm Beach, Florida.
The loan transferred into special servicing in February 2010 due to maturity
The remaining 12 specially serviced loans are secured by a mix of property
types. The master servicer has recognized an aggregate $165.3
million appraisal reduction for 12 of the specially serviced loans.
Moody's review will focus on potential losses from specially serviced
and troubled loans and the performance of the overall pool.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings; parties not involved in the ratings;
public information; confidential and proprietary Moody's investors
Service information; confidential and proprietary Moody's Analytics'
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Downgrades Four Classes and Places Eight CMBS Classes of Banc of America 2005-3 on Review for Possible Downgrade
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