Fitch Takes Various Actions on GECMC 2005-C3

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings downgrades two, upgrades six and affirms five classes of GE Commercial Mortgage Corporation, series 2005-C3 commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The downgrades are the result of additional certainty of expected losses due to additional transfers to special servicing since Fitch's last rating action.

The upgrades are the result of higher credit enhancement due to significant paydown, as well as the expectation of additional paydown given the concentration of upcoming loan maturities.

Fitch expected losses are 7.3% or 5.3% of the original pool, including losses incurred to date (3% or $64.1 million). Currently, there are four loans in special servicing (7.2%). Seven loans (12.2%) are defeased and include two top 15 loans (6.3%). All of the remaining nonspecially serviced loans mature in 2015 with 24% maturing in June, or $162.7 million; 33% maturing in July, or $217.7 million; 21% maturing in August, or $139.1 million; and 22% in September, or $149.1 million.

As of the May 2015 distribution date, the pool's aggregate principal balance has paid down 68.4% to $668.6 million from $2.1 billion at issuance, including the $64.1 million in realized losses. Total paydown due to maturing loans totalled $169.3 million in May 2015 and $210.5 million in April 2015. Cumulative interest shortfalls total $1.3 million and affect classes K and the non-rated class Q.

The largest contributors to loss include the specially serviced Village at Main Street Shopping Center (4%), Greens at Irene (3.6%) and the specially serviced Shaw's Marketplace (1.7%).

The Village at Main Street Shopping Center is collateralized by a 15 building, 125,697 square foot (sf) mixed use office/retail complex located in Wilsonville (Portland), OR. The loan was transferred to special servicing in March 2015 after the borrower stated they would be unable to payoff the loan at the June 1, 2015 maturity date. The largest tenant, LA Fitness (30% of the net rentable area) notified the borrower they plan to vacate their space ahead of the lease expiration and pay 12 months of rent as an early termination penalty. Occupancy is expected to fall to approximately 60% occupancy with a debt service coverage ratio (DSCR) of approximately 0.75x. Fitch assumed losses based on a discount to the most recent 2015 appraisal value.

Greens at Irene is secured by a 504 unit multifamily property located in Memphis, TN. The loan has been on the master servicer's watchlist repeatedly over the last several years due to low DSCR. It is currently on the watchlist for upcoming maturity and low DSCR. As of YE 2014, the DSCR fell to 0.77x from 0.85x as of YE 2013 and 1.24x as of YE 2012. During 2013, occupancy declined to 91% from 98% as of YE 2012. Occupancy has increased to 98% as of YE 2014; however, the DSCR remains low due to higher expenses such as repairs and maintenance and payroll. Fitch's valuation is based on the YE 2014 reported net operating income and a Fitch stressed cap rate. The loan continues to perform and matures in August 2015.

Shaw's Marketplace is secured by a 75,455 sf retail property located in Manchester (Hartford), CT. The retail center was anchored by Shaw's (65,227 sf, 86% NRA), who left in 2010. The loan transferred to the special servicer in February 2015 after the borrower notified them they would not pay off the loan at the July 2015 maturity. According to the special servicer, the borrower has stated that as Shaw's controls the space and sublets to another tenant (Save-a-Lot), they have been unable to control the space or rent it to another tenant which prohibits their ability to refinance the loan. The special servicer continues to explore workout options. Fitch assumed losses based on a discount on several valuations, including appraisals and broker opinions of value.

RATING SENSITIVITIES

Conservative stresses were run on the pool given the lack of updated financial information, as only 40% of the pool has reported YE 2014 or 3Q 2014 financial statements. The Outlooks on classes A-7A through F are Stable due to the expectation of increasing credit enhancement as a result of the significant paydown due to upcoming maturities. Fitch will monitor the status of maturing loans and may review the transaction again if more loans than expected transfer to special servicing. Downgrades are possible if expected losses increase due to maturity defaults. The Rating Outlook for Class G remains Negative and will be downgraded if expected losses occur. Classes H and J will be downgraded if additional losses are experienced.

DUE DILIGENCE USAGE

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

Fitch downgrades and assigns or revises Recovery Estimates for the following classes:

--$21.2 million class H to 'CCCsf' from 'B-sf'; RE 100%;

--$31.7 million class J to 'Csf' from 'CCsf'; RE 20% from RE 30%.

Fitch upgrades the following classes and revises Outlooks where indicated:

--$161.4 million class A-J to 'AAAsf' from 'AAsf'; Outlook revised to Stable from Positive;

--$13.2 million class B to 'AAAsf' from 'AAsf'; Outlook Stable;

--$29.1 million class C to 'AAsf' from 'Asf'; Outlook Stable;

--$21.2 million class D to 'Asf' from 'BBBsf'; Outlook Stable;

--$34.4 million class E to 'BBBsf' from 'BBB-sf'; Outlook Stable;

--$18.5 million class F to 'BBB-sf' from 'BBsf'; Outlook Stable.

Fitch affirms the following classes:

--$90.6 million class A-7A at 'AAAsf'; Outlook Stable;

--$55.2 million class A-7B at 'AAAsf/'; Outlook Stable;

--$257.1 million class A-1A at 'AAAf'; Outlook Stable;

--$23.8 million class G at 'BBsf'; Outlook Negative.

--$4.7 million class K at 'Dsf'; RE 0%.

Classes A-1, A-2, A-3FX, A-3FL, A-4, A-5, A-6 and A-AB have paid in full. Classes L, M, N and O are affirmed at 'Dsf' RE0%, and have been reduced to zero due to realized losses. Classes P and Q, also reduced to zero due to realized losses, are not rated by Fitch. Fitch previously withdrew the ratings on the interest only classes X-C and X-P.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 31 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

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

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985898

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/20150604006331/en/

Fitch Ratings
Primary Analyst
Britt Johnson, +1-312-606-2341
Senior Director
Fitch Ratings
70 W. Madison
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations
Sendhil Selvaraj, +44 (0) 207 682 7218
[email protected]

Source: Fitch Ratings

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