Fitch Affirms BACM 2006-3

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed 15 classes of Banc of America Commercial Mortgage Inc. (BACM) commercial mortgage pass-through certificates series 2006-3. The affirmations reflect stable collateral performance since Fitch's last review. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Fitch modeled losses of 12.4% of the remaining pool; expected losses on the original pool balance total 19.8%, including $216.9 million (11% of the original pool balance) in realized losses to date. Fitch has designated 25 loans (48%) as Fitch Loans of Concern, which includes six specially serviced assets (7%).

As of the August 2015 distribution date, the pool's aggregate principal balance has been reduced by 29.4% to $1.39 billion from $1.96 billion at issuance. Per the servicer reporting, six loans (14.2% of the pool) are defeased. Interest shortfalls are currently affecting classes A-J through P. The majority of the pool matures in 2016. Excluding the loans in special servicing, 1.6% of the collateral matures prior to the end of the first quarter, 72.1% in the second quarter and 12.4% in the third quarter. The modified Rushmore Mall now matures in 2019.

The largest contributor to expected losses is the specially-serviced Fifth Third Center loan (3.6% of the pool). The loan is secured by two interconnected office buildings totalling 330,849 sf in downtown Columbus, OH. The loan transferred to the special servicer in May 2015 due to imminent default. The May 2015 occupancy was reported to be 74.5%, with approximately 16% of the space rolling in the next two years. The borrower and Special Servicer are working towards an uncontested foreclosure or possible deed-in-lieu of foreclosure.

The second largest contributor to expected losses is the Rushmore Mall loan (6.8% of the pool), which is secured by a 737,725-sf regional mall located in Rapid City, SD. The loan transferred to special servicing in July 2011. A modification was completed in October 2014 which bifurcated the loan into a $58 million A-note and a $35 million B-note and extended the term until February 2019. The loan has been returned to the master servicer and is performing under the modified terms.

The third largest contributor to expected losses is the Republic Place loan (6.5%), which is secured by a 10-story, 213,475-sf office building located in the CBD of Washington, D.C., approximately two blocks from the White House. The largest tenant, The Nuclear Energy Institute, vacated at its year-end 2012 lease expiration, reducing property occupancy to 73.5%. Two other tenants have since vacated further reducing occupancy to 66% as of YE 2014. The borrower has completed some significant renovations to the property and is actively marketing the vacant space.

RATING SENSITIVITIES

The Rating Outlooks on the senior classes remain Stable due to increasing credit enhancement from continued paydown and defeasance. The Rating Outlook on class A-M is Negative due to potential erosion in credit enhancement following the disposition of loans currently in special servicing as well as several highly levered performing loans in the pool. If losses on the specially serviced loans exceed Fitch's expectations or should loans fail to pay off at maturity, downgrades to this class is possible. If the majority of the loans in the pool pay off at their upcoming maturity date, some upgrades could be possible. The distressed classes will be downgraded as losses are realized.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch affirms the following classes as indicated:

--$924.5 million class A-4 at 'AAAsf'; Outlook Stable;

--$89.7 million class A-1A at 'AAAsf'; Outlook Stable;

--$196.5 million class A-M at 'BBsf'; Outlook Negative;

--$152.3 million class A-J at 'Csf'; RE 0%;

--$23.8 million class B at 'Dsf'; RE 0%;

--$0 class C at 'Dsf'; RE 0%;

--$0 class D at 'Dsf'; RE 0%;

--$0 class E at 'Dsf'; RE 0%;

--$0 class F at 'Dsf'; RE 0%;

--$0 class G at 'Dsf'; RE 0%;

--$0 class H at 'Dsf'; RE 0%;

--$0 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%.

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

Structured Finance then CMBS then Criteria Reports

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990558

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990558

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150909006484/en/

Fitch Ratings
Primary Analyst
R. Brook Sutherland
Senior Director
+1-312-606-2346
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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