OREANDA-NEWS. Fitch Ratings has upgraded one class and affirmed 16 classes of Cobalt CMBS Commercial Mortgage Trust's (COBALT) commercial mortgage pass-through certificates series 2007-C3. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade reflects the increased credit enhancement as a result of paydown of approximately \$142.7 million (or 7% of the original pool balance) since Fitch's last review, coupled with the defeasance of the 90 John Street loan (3.9% of the pool). Fitch modeled losses of 14.5% of the remaining pool; expected losses on the original pool balance total 14.7%, including \$84.8 million (4.2% of the original pool balance) in realized losses to date. Fitch has designated 34 Fitch Loans of Concern (42.2%), which includes five specially serviced assets (4%).

As of the February 2015 distribution date, the pool's aggregate principal balance has been reduced by 28.1% to \$1.4 billion from \$2.02 billion at issuance. Three loans (4.7%) are fully defeased, including the \$57 million 90 John Street loan which defeased shortly after the February 2015 remittance date. Interest shortfalls are currently affecting classes F through P.

RATING SENSITIVITIES

The ratings of the 'AAA' rated classes are expected to remain stable as these classes are expected to continue to receive paydown. The distressed classes are subject to further rating actions as losses are realized.

The largest contributor to expected losses is the Irvine EOP San Diego Portfolio loan (9.5% of the pool), the second largest loan in the pool. The interest only (IO) loan is collateralized by seven properties consisting of six class A and B office buildings and one single-tenant restaurant all located in San Diego, CA. The aggregate square footage for the portfolio is 380,954 square feet (sf). Per the September 2014 rent roll the portfolio's occupancy has steadily improved to 94.5%, compared to 91% in December 2012, 81% in December 2011, and 69% June 2010. .

Despite occupancy improvements, property performance remains below underwritten levels with the net operating income (NOI) debt service coverage ratio (DSCR) reporting at 0.81x and 0.59x for year-end (YE) June 2014 and June 2013, respectively. Leases for approximately 43% of the collateral's net rentable area (NRA) are scheduled to expire by year end 2016. The loan remains current and is with the master servicer.

The next largest contributor to expected losses is the Arbors at Broadlands loan (3.5%), the fifth largest loan in the pool. The IO loan is secured by a 240-unit multifamily property located in Ashburn, VA (approximately eight miles north-west of the Dulles Airport). The property has never met its underwritten rent projections and performance has remained low since securitization. The September 2014 rent roll reported occupancy at 94%, compared to 75% at issuance. .

Despite high occupancy however, NOI DSCR remains low reporting at 1.05x and 1.03x for year to date (YTD) September 2014 and YE December 2013, respectively. Per Reis' fourth-quarter 2014 report, overall vacancy reported at 5.7% for the Suburban VA, Loundon County Submarket, with asking rents of \$1,632 per month, compared to average in-place rents of \$1,689 per month at the subject property. The loan has remained current since issuance and is with the master servicer.

The third largest contributor to expected losses is the Sheraton Suites - Alexandria, VA loan (3.8%), the fourth largest loan in the pool. The loan is secured by a 247-key full-service hotel located in the Old Town section of Alexandria, VA, just outside of Washington, D.C. The property has had declining occupancy and room revenue's since 2011. The trailing twelve month (TTM) ended December 2014 reported occupancy of 73.6%, ADR of \$144.73, and RevPAR of \$106.45, compared with 72.3%, \$137.17, and \$99.16, respectively, at YE December 2013. Per the January 2015 Smith Travel Research Report (STR), the property is underperforming its competitive set which reports TTM occupancy at 74.2%, ADR at \$160.12, and RevPAR at \$118.85. The loan, which has been amortizing since July 2012, reported an NOI DSCR of 1.0x for YE 2014 and 0.89x for YE 2013, compared to 1.16x at YE 2012 and 1.42x at YE 2011. The loan remains current and is with the master servicer.

Fitch upgrades the following classes as indicated:

--\$201.7 million class A-M to 'BBBsf' from 'BBB-sf', Outlook Stable.

Fitch also affirms the following classes:

--\$690.4 million class A-4 at 'AAAsf', Outlook Stable;
--\$238.5 million class A-1A at 'AAAsf', Outlook Stable;
--\$153.8 million class A-J at 'CCCsf', RE 70%;
--\$40.3 million class B at 'CCCsf', RE 0%;
--\$20.2 million class C at 'CCsf', RE 0%;
--\$25.2 million class D at 'CCsf', RE 0%;
--\$20.2 million class E at 'Csf', RE 0%;
--\$25.2 million class F at 'Csf', RE 0%;
--\$22.7 million class G at 'Csf', RE 0%;
--\$11 million class H at 'Dsf', RE 0%;
--Class J at 'Dsf', RE 0%;
--Class K at 'Dsf', RE 0%;
--Class L at 'Dsf', RE 0%;
--Class M at 'Dsf', RE 0%;
--Class N at 'Dsf', RE 0%;
--Class O at 'Dsf', RE 0%.

The class A-1, A-2, A-3, and A-PB certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class IO certificates.