Fitch Ratings has downgraded four distressed classes of Credit Suisse First Boston Mortgage Securities Corp., series 2003-C3 (CSFB 2003-C3) commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this release.
The downgrades reflect an increase in Fitch expected losses across the pool and greater certainty of losses associated with specially serviced assets. Fitch modeled losses of 5.1% of the original pool (includes losses realized to date) based on Fitch’s valuations of performing and specially serviced loans. Fitch has identified 31 loans (24.4%) as Fitch Loans of Concern, which includes seven specially-serviced loans (4.1%).
As of the November 2012 distribution date, the pool’s aggregate principal balance has reduced by 50.7% to $849.8 million from $1.72 billion at issuance. In addition, 23 loans (12.6%) have been fully defeased. Interest shortfalls totaling $1,524,118 are currently affecting classes M through P.
The largest contributor to modeled losses is a specially-serviced asset (2.4%) secured by a 708 unit multifamily property in Houston, TX. The loan was transferred to special servicing in January 2010 due to imminent payment default and the property was foreclosed on by the trust in July 2011. Significant renovations including a major foundation repair have been completed and the property is currently being marketed for sale.
The second largest contributor to modeled losses is a loan (2.90%) secured by a 216,416 square foot (sf) office complex located in Farmington Hills, MI, 25 miles northwest of Detroit. The servicer reported occupancy as of July 2012 was 61% which has resulted in a low debt service coverage ratio (DSCR) of .88 times (x) as of June 2012. Rollover risk is high through 2013, with leases expiring on approximately 35% of combined net rentable area (NRA) including the largest tenant, which expires in October 2013 and represents 30.4% of NRA. Despite the low DSCR the loan is current and the borrower continues to fund any shortfalls.
The third largest contributor to modeled losses is a loan (2%) secured by seven industrial buildings with a total of 424,004 sf located in Elk Grove Village, IL. The servicer reported occupancy as of June 2012 was 79% with a debt service coverage ratio (DSCR) of 1.11x. The borrower continues to use concessions such as one month free rent per year of lease term to attract new tenants.
The largest loan in the transaction, 622 Third Avenue, (24.8%), is secured by a one million sf class A office building located in midtown Manhattan, NY. The whole loan is divided into a $183.8 million pooled portion, a $36.2 million non-pooled portion (representing classes 622A through 622F) and a B-note held outside of the trust. As of October 2012, occupancy is 99% compared to 98% at issuance.
The class P is not rated by Fitch. Class A-1, A-2, A-3, A-4, and A-SP have paid in full.
Fitch has previously withdrawn the ratings on the interest-only classes A-X, and A-Y. (For additional information on the withdrawal of the rating on the interest-only class, see ‘Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities’, dated June 23, 2010.)
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