Fitch Downgrades 2 Classes of GMAC 2002-C3
KEY RATING DRIVERS
The downgrades reflect an increase in Fitch-modeled losses since the last rating action. Fitch modeled losses of 42.7% of the remaining pool; expected losses on the original pool balance total 5.3%, including \$25.1 million (3.2% of the original pool balance) in realized losses to date. Fitch had modeled losses of 4.9% of the original pool balance at the last rating action.
As of the March 2015 distribution date, the pool's aggregate principal balance has been reduced by 95.3% to \$36.4 million from \$777.4 million at issuance. Interest shortfalls are currently affecting classes J through P. The pool is extremely concentrated with eight loans remaining. Fitch has designated five loans (89.3% of the pool) as Fitch Loans of Concern, which includes two specially serviced assets (32%). Per the servicer reporting, one loan (3.6% of the pool) is defeased. Two loans (57.3%) were previously modified while in special servicing and are current under the modified terms as of the March 2015 remittance; however, both loans are Fitch's largest contributors to expected losses as collateral performance continues to lag.
RATING SENSITIVITIES
The Negative Outlook on class J reflects the adverse selection of the remaining pool with no near-term resolutions on the specially serviced loans, and continued weak performance on loans which were modified while in special servicing. The class could be subjected to future downgrades should collateral performance continue to decline and expected losses increase. Distressed classes (those rated below 'B') may be subject to downgrades as losses are realized or if realized losses are greater than Fitch's expectations.
The largest contributor to expected losses is the pool's largest loan, Broadmoor Apartments (33.9% of the pool), which is secured by a 284-unit multifamily property located in Tampa, FL. The loan was transferred to special servicing in July 2012 due to maturity default. In April 2013, the borrower filed Chapter 11 bankruptcy. A court-ordered modification was subsequently granted in November 2013, with terms including an increase in principal, a reduction in interest rate, a four-year loan extension, and a modified payment schedule with interest-only payments for the first 18 months and principal and interest payments for the remainder of the loan term.
The loan transferred back to the master servicer in April 2014. As of year-end (YE) December 2014 occupancy reported at 82.8%, and net operating income (NOI) debt service coverage ratio (DSCR) reported at 0.91x. The loan remains current under the modified terms as of the March 2015 payment date.
The next largest contributor to modeled losses is the second largest loan, Nashville Business Center (23.4%), which is secured by an 893,100 square foot (sf) industrial complex located in Murfreesboro, TN. The loan was transferred to special servicing in November 2011 for monetary default after a major tenant, Vi-Jon (a private health care and beauty manufacturer) which initially occupied 50% of the space, vacated at its May 2010 lease expiration. In September 2013, a modification was granted whereby the loan was bifurcated into an A-note and B-note, the loan was converted to interest-only for the remaining term, and the maturity date was extended to July 2015 with one one-year extension option remaining. The loan transferred back to the master servicer in March 2014.
Occupancy recently declined to 69% as of December 2014 from 83% in September 2014 due to the largest tenant, Store Opening Solutions, reducing its space to 447,100 square feet (50% of the net rentable area [NRA]) from 517,500 square feet. Per the rent roll, approximately 22.4% is leased by Store Opening Solutions through December 2015, while 27.7% of the property was being leased on a month-to-month basis. The NOI DSCR reported at 1.15x as of year to date September 2014 and 0.73x as of YE December 2013. The loan remains current under the modified terms as of the March 2015 payment date.
The third largest contributor to expected losses is the specially-serviced Lake Park Pointe Shopping Center loan (19.6%), which is secured by a 79,945 sf retail property located in Chicago, IL. The loan was transferred to special servicing in April 2012 for monetary default. The prior largest tenant, Michael's Fresh Markets (previously 53% of property square footage), filed Chapter 11 bankruptcy and vacated. A portion of this space was re-tenanted by Ross Dress for Less (32%) in November 2013. Multiple forbearance agreements were executed, including prior ones that had expired in December 2012, March 2013, December 2013, and March 2014. According to the servicer, the borrower was recently in negotiations with a bank for a potential refinance; however, proceeds were insufficient to pay the subject loan in full. The servicer has submitted another forbearance agreement to the borrower for review.
Fitch downgrades the following classes and assigns or revises Recovery Estimates (REs) as indicated:
--\$16.8 million class J to 'Bsf' from 'BBsf'; Outlook Negative;
--\$8.7 million class K to 'CCCsf' from 'Bsf'; RE 35%.
Fitch affirms the following classes as indicated:
--\$5.8 million class L at 'CCsf'; RE 0%;
--\$4.9 million class M at 'Csf'; RE 0%;
--\$209,059 class N at 'Dsf'; RE 0%;
--\$0 class O-1 at 'Dsf'; RE 0%;
--\$0 class O-2 at 'Dsf'; RE 0%.
The class A-1, A-2, B, C, D, E, F, G and H certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.
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