Fitch Affirms Distressed Ratings of CSFB 2003-C3
KEY RATING DRIVERS
The affirmations of the distressed ratings are based on the concentrated nature of the pool, with only 11 loans remaining and the high percentage of specially serviced loans (63% of the current balance). As of the September 2016 distribution date, the pool's aggregate principal balance has been reduced by 98.5% to $23.4 million from $1.76 billion at issuance. Per the servicer reporting, two loans (5.1%) are defeased with scheduled maturities in the first half of 2018. The non-specially serviced and non-defeased loans mature in 2018 (6.9%), 2021 (5.1%) and 2023 (19.6%). Interest shortfalls are currently affecting classes K, O, and P.
The largest specially serviced asset (26.2% of the pool) is a 163,393 square foot (sf) suburban office building located in Colorado Springs, CO. The single tenant property is 100% occupied by Honeywell International (rated 'A', Outlook Stable by Fitch as of April 21, 2016). The loan transferred to special servicing in February 2013 due to maturity default and became real estate owned (REO) in May 2014. Honeywell has indicated that they will not be renewing their lease expiring in November 2016. Per servicer reporting, the property is currently under contract.
The next largest specially serviced loan (18.5%) is secured by a 176,508 sf regional mall located in Las Vegas, NV. The property is encumbered by a master ground lease and revenue is derived from a combination of three tenants sub-letting space and the rental revenue from 31,845 sf of retail space. The loan transferred to the special servicer in July 2014 due to non-monetary default. The asset was 70% occupied as of the November 2015 rent roll. A court receiver was appointed in September 2014 and the servicer is currently pursuing foreclosure.
The third specially serviced loan (17.7%) is secured by a 64,665 sf suburban office building located in Elmsford, NY. The loan transferred to the special servicer in January 2015 due to payment and maturity default. A receiver took possession of the property in October 2015 and the servicer is currently pursuing foreclosure. As of the second quarter of 2016, REIS reported a market vacancy of 18.5% for the Westchester, NY metropolitan area, while the last reported occupancy in 2014 was 57% at the subject property.
RATING SENSITIVITIES
Paydown to class J is reliant on proceeds from the specially serviced loans. Upgrades to class J may be possible if the REO asset is disposed with limited realized losses. Downgrades are possible if losses are higher than currently anticipated.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
--$17 million class J notes at 'CCCsf'; RE 100%
--$6.3 million class K notes at 'Dsf'; RE 5%;
--$0 million class L notes at 'Dsf'; RE 0%;
--$0 million class M notes at 'Dsf'; RE 0%;
--$0 million class N notes at 'Dsf'; RE 0%;
--$0 million class O notes at 'Dsf'; RE 0%;
The class A-1, A-2, A-3, A-4, A-5, B, C, D, E, F, G, H, ASP, 622A, 622B, 622C, 622D, 622E, and 622F certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class A-X and A-Y certificates.
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