Approximately $500.7 Million of Structured Securities Affected
New York, February 16, 2012 -- Moody's Investors Service (Moody's) downgraded the ratings of seven classes
and affirmed nine CMBS classes of GMAC Commercial Mortgage Securities,
Inc., Series 2002-C3 Mortgage Pass-Through
Certificates as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. E, Affirmed at Aa1 (sf); previously on Mar 9,
2011 Confirmed at Aa1 (sf)
Cl. F, Affirmed at Aa3 (sf); previously on Sep 25,
2008 Upgraded to Aa3 (sf)
Cl. G, Downgraded to Baa3 (sf); previously on Feb 16,
2006 Upgraded to A3 (sf)
Cl. H, Downgraded to Ba1 (sf); previously on Feb 16,
2006 Upgraded to Baa1 (sf)
Cl. J, Downgraded to B3 (sf); previously on Jul 7,
2011 Downgraded to B1 (sf)
Cl. K, Downgraded to Caa2 (sf); previously on Jul 7,
2011 Downgraded to Caa1 (sf)
Cl. L, Downgraded to Caa3 (sf); previously on Jul 7,
2011 Downgraded to Caa2 (sf)
Cl. M, Downgraded to Ca (sf); previously on Dec 2,
2010 Downgraded to Caa3 (sf)
Cl. N, Downgraded to C (sf); previously on Dec 2,
2010 Downgraded to Ca (sf)
Cl. O-1, Affirmed at C (sf); previously on Dec
2, 2010 Downgraded to C (sf)
Cl. O-2, Affirmed at C (sf); previously on Dec
2, 2010 Downgraded to C (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
RATINGS RATIONALE
The downgrades are due to higher than expected losses from troubled loans
and loans in special servicing as well as increased interest shortfalls.
The affirmations 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.
Moody's rating action reflects a cumulative base expected loss of
4.6% of the current balance. At last review,
Moody's cumulative base expected loss was 4.1%.
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 the slowdown
in growth in the current macroeconomic environment and the commercial
real estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation rebounds.
The hotel and multifamily sectors are in recovery and improvements in
the office sector continue, with fundamentals in Gateway cities
outperforming their suburban counterparts. However, office
demand is closely tied to employment, where fundamentals remain
weak, so significant improvement may be delayed. Performance
in the retail sector has been mixed with on-going rent deflation
and leasing challenges. Across all property sectors, the
availability of debt capital continues to improve with monetary policy
expected to remain supportive and interest rate hikes postponed.
Moody's central global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's Approach
to Rating U.S. CMBS Conduit Transactions" published
in September 2000. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
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 2.60 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 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 37
compared to 40 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 July 7, 2011.
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 February 10, 2012 distribution date, the transaction's
aggregate certificate balance has decreased by 35% to $504.9
million from $777.4 million at securitization. The
Certificates are collateralized by 85 mortgage loans ranging in size from
less than 1% to 6% of the pool, with the top ten non-defeased
loans representing 28% of the pool. Twenty loans,
representing 27% of the pool, have defeased and are secured
by U.S. Government securities.
Eighteen loans, representing 20% 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.
Four loans have been liquidated from the pool, resulting in a realized
loss of $13.3 million (55.8% loss severity).
Currently six loans, representing 8% of the pool, are
in special servicing. Moody's estimates an aggregate $13.9
million loss for the specially serviced loans (45% expected loss
on average).
Moody's has assumed a high default probability for five poorly performing
loans representing 4% of the pool and has estimated an aggregate
$3.2 million loss (15% expected loss based on a 50%
probability default) from these troubled loans.
As of the most recent remittance date, the pool has experienced
cumulative interest shortfalls totaling $2.23 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 non-advancing
by the master servicer based on a determination of non-recoverability.
The master servicer has made a determination of non-recoverability
for the 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 full year 2010 operating results for 89%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 82% compared to 81%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 7% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.0%.
Excluding special serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.41X and 1.35X, respectively,
compared to 1.45X and 1.36X 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 13% of the pool.
The largest loan is the Clifton Commons Loan ($30.2 million
-- 6% of the pool), which is secured by a 173,000
square foot (SF) retail center located in Clifton, New Jersey.
Major tenants include a 16-screen AMC Theatre (36% of the
gross leasable area (GLA); lease expiration in May 2019), The
Sports Authority (25% of the GLA; lease expiration in March
2014) and Barnes & Noble (20% of the GLA; lease expiration
in May 2014). As of June 2011, the property was 100%
leased, the same as at last review. Performance is stable.
Moody's LTV and stressed DSCR are 75% and 1.26X, respectively,
compared to 79% and 1.20X at last review.
The second largest loan is the Shops at River Park Loan ($24.4
million -- 4.8% of the pool), which
is secured by a 134,000 SF retail center located in Fresno,
California. Major tenants include Borders Books (18% of
the GLA; lease expiration in May 2013) and Cost Plus World Market
(13% of the GLA; lease expiration in January 2012).
As of September 2011, the property was 97% leased compared
to 90% as of December 2009. Moody's LTV and stressed DSCR
are 70% and 1.41X, respectively, compared to
74% and 1.34X at last review.
The third largest loan is the Sea Aire Apartments Loan ($12.3
million -- 2.4% of the pool), which
is secured by 336-unit multifamily property located in Somers Point,
New Jersey. As of September 2011, occupancy was 92%
compared to 86% at last review. Performance has been stable.
Moody's LTV and stressed DSCR are 87% and 1.08X, respectively,
compared to 91% and 1.04X, at last review.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. Further information on the EU endorsement status and on the
Moody's office that has issued a particular Credit Rating is available
on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
Information sources used to prepare the 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, and confidential and proprietary Moody's
Analytics information.
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.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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 the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's 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 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.
Brad Kamedulski
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 M. 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 Downgrades Seven and Affirms Nine CMBS Classes of GMACC 2002-C3
