Approximately $881 million of Structured Securities Affected
New York, April 28, 2011 -- Moody's Investors Service (Moody's) downgraded three and affirmed twenty-seven
classes of Banc of America Commercial Mortgage Inc., Commercial
Mortgage Pass-Through Certificates, Series 2004-3as
follows:
Cl. A-4, Affirmed at Aaa (sf); previously on
Jul 20, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-5, Affirmed at Aaa (sf); previously on
Jul 20, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Jul 20, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Jul 20,
2004 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aa1 (sf); previously on Mar 9,
2007 Upgraded to Aa1 (sf)
Cl. C, Affirmed at Aa2 (sf); previously on Mar 9,
2007 Upgraded to Aa2 (sf)
Cl. D, Affirmed at A2 (sf); previously on Jun 9,
2010 Confirmed at A2 (sf)
Cl. E, Affirmed at A3 (sf); previously on Jun 9,
2010 Confirmed at A3 (sf)
Cl. F, Affirmed at Baa2 (sf); previously on Jun 9,
2010 Downgraded to Baa2 (sf)
Cl. G, Downgraded to B1 (sf); previously on Jun 9,
2010 Downgraded to Ba1 (sf)
Cl. H, Downgraded to B3 (sf); previously on Jun 9,
2010 Downgraded to B1 (sf)
Cl. J, Downgraded to Caa1 (sf); previously on Jun 9,
2010 Downgraded to B3 (sf)
Cl. K, Affirmed at Caa3 (sf); previously on Jun 9,
2010 Downgraded to Caa3 (sf)
Cl. L, Affirmed at Ca (sf); previously on Jun 9,
2010 Downgraded to Ca (sf)
Cl. M, Affirmed at C (sf); previously on Jun 9,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Jun 9,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Jun 9,
2010 Downgraded to C (sf)
Cl. SS-A, Affirmed at Baa3 (sf); previously on
Jul 20, 2004 Assigned Baa3 (sf)
Cl. SS-B, Affirmed at Ba1 (sf); previously on
Jul 20, 2004 Assigned Ba1 (sf)
Cl. SS-C, Affirmed at Ba2 (sf); previously on
Jul 20, 2004 Assigned Ba2 (sf)
Cl. SS-D, Affirmed at Ba3 (sf); previously on
Jul 20, 2004 Assigned Ba3 (sf)
Cl. UH-A, Affirmed at Aaa (sf); previously on
Jun 9, 2010 Upgraded to Aaa (sf)
Cl. UH-B, Affirmed at Aa1 (sf); previously on
Jun 9, 2010 Upgraded to Aa1 (sf)
Cl. UH-C, Affirmed at Aa2 (sf); previously on
Jun 9, 2010 Upgraded to Aa2 (sf)
Cl. UH-D, Affirmed at Aa3 (sf); previously on
Jun 9, 2010 Upgraded to Aa3 (sf)
Cl. UH-E, Affirmed at A1 (sf); previously on
Jun 9, 2010 Upgraded to A1 (sf)
Cl. UH-F, Affirmed at A2 (sf); previously on
Jun 9, 2010 Upgraded to A2 (sf)
Cl. UH-G, Affirmed at A3 (sf); previously on
Jun 9, 2010 Upgraded to A3 (sf)
Cl. UH-H, Affirmed at Baa1 (sf); previously on
Jun 9, 2010 Upgraded to Baa1 (sf)
Cl. UH-J, Affirmed at Baa2 (sf); previously on
Jun 9, 2010 Upgraded to Baa2 (sf)
RATINGS RATIONALE
The downgrades are due to interest shortfalls caused by specially serviced
loans.
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 5.7%
of the current balance. At last full review, Moody's cumulative
base expected loss was 5.3%. Moody's stressed scenario
loss is 10.2% 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 these ratings was "CMBS: Moody's
Approach to Rating Fusion Transactions" published in April 2005.
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 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 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 28
compared to 38 at Moody's prior full 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 June 9, 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 April 11, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 29% to $819.89
million from $1.16 billion at securitization. The
Certificates are collateralized by 75 mortgage loans ranging in size from
less than 1% to 12% of the pool, with the top ten
loans representing 46% of the pool. Seven loans, representing
6% of the pool, have defeased and are collateralized with
U.S. Government securities, compared to 5.2%
at last review. Two loans, representing 20.2%
of the pool, have investment grade credit estimates.
Twenty-three loans, representing 22% 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's (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.
Five loans have been liquidated from the pool since securitization,
resulting in an aggregate $1.9 million loss (7% loss
severity on average). Currently five loans, representing
9% of the pool, are in special servicing. The largest
specially serviced loan is the St. Clair Estates Manufactured Home
Community Loan ($25.2 million -- 3%
of the pool), which is secured by a 628-pad unit manufactured
housing community. The loan was transferred to special servicing
in May 2009 for monetary default and is currently in foreclosure.
The remaining three specially serviced loans are secured by a mix of office,
multifamily, and mobile home properties. The master servicer
has recognized an aggregate $39.2 million appraisal reduction
for the specially serviced loans. Moody's has estimated an aggregate
loss of $35.4 million (65% expected loss on average)
for four of the specially serviced loans.
Moody's has assumed a high default probability for three poorly performing
loans representing 1% of the pool and has estimated a $1.7
million loss (15% expected loss based on a 50% probability
default) from these troubled loans.
Based on the most recent remittance statement, Classes H through
P have experienced cumulative interest shortfalls totaling $2.8
million. Moody's anticipates that the pool will continue to experience
interest shortfalls because of the high exposure to 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 largest loan in special servicing and is no longing advancing
for this loan.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 96% and 82% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 88% compared to 89% at last full review.
Moody's net cash flow reflects a weighted average haircut of 11%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCR are 1.48X and 1.02X, respectively,
compared to 1.44X and 1.16X at last full 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 largest loan with a credit estimate is the U-Haul Portfolio
Loan ($95.3 million --12% of the pool),
which is secured by 78 properties operated as U-Haul storage or
rental centers. The portfolio is also encumbered by a $65.2
million B-note which is the collateral for non-pooled Classes
UH-A, UH-B, UH-C, UH-D,
UH-E, UH-F, UH-G, UH-H and
UH-J. The properties total 4.0 million square feet
(SF) and are located in 24 states with concentrations in Texas (21%),
Florida (16%) and Arizona (10.4%). The portfolio
was 100% leased as of December 2009. Moody's current credit
estimate and stressed DSCR are Aaa and 2.84X, respectively,
compared to Aaa and 2.77X at last full review.
The second loan with a credit estimate is the 17 State Street Loan ($70.0
million -- 8.5% of the pool), which is secured
by a 44-story, Class A, 532,000 SF office building
located within the South Ferry/Financial District sub-market of
New York City. The property is encumbered by a $33.9
million B-note which is the collateral for non-pooled Classes
SS-A, SS-B, SS-C, SS-D and
a non-rated class. The loan was transferred into special
servicing in July 2010 due to the servicer's determination of imminent
default and was sent back to the master servicer on April 1, 2011.
Although property performance has improved since last review, Moody's
analysis reflects a downward adjustment because the property's overall
rental level is above market levels. Moody's current credit estimate
and stressed DSCR are Baa2 and 1.48X, respectively,
compared to Baa2 and 1.50X at last full review.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the SUN Communities --
Scio Farm Loan ($38.5 million -- 5%
of the pool), which is secured by a 913-pad manufactured
housing community located in Ann Arbor, Michigan. As of December
2010, the portfolio was 94% leased compared to 97%
at last full review. Moody's LTV and stressed DSCR are 92%
and 1.00X, respectively, compared to 96% and
0.96X at last full review.
The second largest loan is the SUN Communities Portfolio 9 Loan ($35.6
million -- 3.7% of the pool), which
is secured by four manufactured housing communities totaling 1,235
pads located in Michigan (3) and Florida (1). As of September 2010,
the portfolio was 94% leased compared o 97% at last full
review. Moody's LTV and stressed DSCR are 90% and 1.08X,
respectively, compared to 93% and 1.05X at last full
review.
The third largest loan is the SUN Communities Portfolio 8 Loan ($26.2
million -- 3.2% of the pool), which
is secured by three manufactured housing communities totaling 1,174
pads located in Indiana (2) and Florida (1). As of December 2010,
the portfolio was 73% leased, the same as last full review.
Moody's LTV and stressed DSCR are 105% and 0.97X,
respectively, compared to 93% and 0.98X at last review.
REGULATORY DISCLOSURES
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, and confidential and proprietary Moody's Analytics'
information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes 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.
New York
Caroline Chan
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 Downgrades Three and Affirms Twenty-Seven CMBS Classes of BACM 2004-3
