NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has downgraded four classes and affirmed 21 classes of GMAC Commercial Mortgage Securities, Inc. commercial mortgage pass-through certificates series 2006-C1. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades are due to increased loss expectations, particularly with regard to the already specially serviced assets.
Fitch modeled losses of 16.4% of the remaining pool; expected losses on the original pool balance total 16.1%, including $78.7 million (4.6% of the original pool balance) in realized losses to date. Fitch has designated 24 loans (38%) as Fitch Loans of Concern, which includes nine specially serviced assets (15.5%).
As of the September 2013 distribution date, the pool's aggregate principal balance has been reduced by 27.9% to $1.25 billion from $1.73 billion at issuance. Per the servicer reporting, four loans (5.1% of the pool) are defeased. Interest shortfalls are currently affecting classes B through Q.
The largest contributor to expected losses is the Design Center of the Americas loan (7.2% of the pool), which is secured by a 789,725 square foot (sf) showroom property located in Dania Beach, FL. The loan was modified in September 2012. Occupancy at the property declined 54% during the 3rd quarter (3Q) 2012 due to several tenants totaling 423,466 sf vacating the property. Per the sub-servicer, the borrower is in the process of converting a portion of the property to general office use and repositioning the asset to enhance its value. As of the July 2013 rent roll, the property is 49% occupied with average rent at $31.25 sf.
The next largest contributor to expected losses is the specially-serviced DDR Macquarie Mervyn's Portfolio loan (5.8%). The portfolio was originally secured by 35 single-tenanted retail properties located in California, Nevada, Arizona, and Texas, of which 17 currently remain. The collateral was previously 100% leased by Mervyn's under 20-year leases; however, the tenant subsequently filed for Chapter 11 bankruptcy relief, and rejected and vacated each of the stores. To date, ten of the stores have been fully leased, four partially leased, 3 are vacant, and 18 have been sold. The portfolio is currently 73% leased. All reserves have been depleted and proceeds from the sale of properties and previous funds held in reserve have been used to reduce the outstanding principal.
The loan is split into three pari passu notes, including the fixed-rate A-2 note in this transaction, the fixed-rate A-1 note ($71.0 million) securitized in the GE 2005-C4 transaction (not rated by Fitch) and the floating-rate A-3 note ($11.4 million) securitized in the COMM 2005-FL11 transaction.
The third largest contributor to expected losses is the specially-serviced Newburgh Mall loan (2.5%), which is secured by a 386,101 sf regional mall located in Newburgh, NY. The loan was transferred to special servicing in November 2011 due to the borrower's request for a loan modification as a result of a declining leasing activity due to weak economic conditions. Per the July 2013 rent roll, the mall is 85% occupied. The special servicer continues to follow a dual track of modification and foreclosure.
Rating Outlooks on classes A-3 through A-1A remain Stable due to increasing credit enhancement and continued paydown. Rating Outlook on class A-M is Negative due to the potential for future defaults and increased loss expectations on some of the larger Fitch loans of concern as well as the increasing expenses on the REO assets.
Fitch downgrades the following classes and assigns or revises Rating Outlooks and Recovery Estimates (REs) as indicated:
--$169.7 million class A-M to 'BBBsf' from 'Asf', Outlook to Negative from Stable;
--$114.6 million class A-J to 'CCsf' from 'CCCsf', RE 55%;
--$36.1 million class B to 'CCsf' from 'CCCsf', RE 0%;
--$19.1 million class C to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes as indicated:
--$23.4 million class A-3 at 'AAAsf', Outlook Stable;
--$576.1 million class A-4 at 'AAAsf', Outlook Stable;
--$184 million class A-1A at 'AAAsf', Outlook Stable;
--$12.7 million class D at 'Csf', RE 0%;
--$21.2 million class E at 'Csf', RE 0%;
--$17 million class F at 'Csf', RE 0%;
--$19.1 million class G at 'Csf', RE 0%;
--$19.1 million class H at 'Csf', RE 0%;
--$1.9 million class J at 'Dsf', RE 0%;
--$0 class K at 'Dsf', RE 0%;
--$0 class L at 'Dsf', RE 0%;
--$0 class M at 'Dsf', RE 0%;
--$0 class N at 'Dsf', RE 0%;
--$0 class O at 'Dsf', RE 0%;
--$0 class P at 'Dsf', RE 0%;
--$5.1 million class FNB-1 at 'Bsf', Outlook Negative;
--$5.6 million class FNB-2 at 'Bsf', Outlook Negative;
--$2.1 million class FNB-3 at 'CCCsf', RE 100%;
--$4.5 million class FNB-4 at 'CCCsf', RE 100%;
--$2.4 million class FNB-5 at 'CCCsf', RE 100%;
--$13.3 million class FNB-6 at 'CCCsf', RE 95%.
Fitch does not rate the class Q certificates. Fitch previously withdrew the ratings on the interest-only class XP and XC certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
- Security Upgrades & Downgrades
- Fitch Ratings
Lisa Cook, +1-212-908-0665
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Mary MacNeill, +1-212-908-0785
Sandro Scenga, New York, +1 212-908-0278