TEXT-Fitch downgrades three classes of BACM 2006-3

Mon Nov 12, 2012 3:38pm EST

Nov 12 - Fitch Ratings has downgraded three classes of Banc of America
Commercial Mortgage Inc., series 2006-3 commercial mortgage pass-through
certificates. A detailed list of rating actions follows at the end of this press
release.

The downgrades are due to an increase in Fitch expected losses, primarily from 
the specially serviced loans. Fitch modeled losses of 11.6% of the remaining 
pool; expected losses of the original pool are at 16.1%, including losses 
already incurred to date. Fitch has designated 22 loans (23.2%) as Fitch Loans 
of Concern, including 10 specially serviced loans (10.3 %).

 

As of the October 2012 distribution date, the pool's aggregate principal balance
has reduced by 18.1% to $1.61 billion from $1.96 billion at issuance. Interest 
shortfalls are affecting classes B through P with cumulative unpaid interest 
totaling $19.8 million. 

The largest contributor to Fitch modeled losses (5%) is a 377,000 square foot 
(sf) class A single-tenant office building located in Parsippany, NJ.  Cendant, 
the single tenant at the property, has signed a lease at another property and 
will be vacating the entire building upon its October 2013 lease expiration 
date.  In November 2011, the Borrower requested a transition of the asset and 
transfer of the deed to the Lender. The Deed-in-Lieu was executed in July 2012 
and the property has since become a real estate owned (REO) asset. 

The second largest contributor to Fitch modeled losses (6.3%) is secured by 
573,370 sf of a 796,162-sf regional mall located in Sioux City, IA.  The mall is
shadow anchored by Sears and JC Penney as neither of which are part of the 
collateral.  Second quarter  2012 (2Q'12) occupancy dropped to 85% from 93% at 
YE2012 due to tenants vacating upon lease expirations. The servicer reported 
2Q'12 debt service coverage ratio (DSCR) was 1.1x, compared to 1.31x at 
issuance.

The third largest contributor to Fitch modeled losses (4.1%) is secured by a 
345-room hotel located in Phoenix, AZ, approximately 1.5 miles from the Phoenix 
International Airport. The property faces strong market competition and has been
underperforming. Trailing 12-month (TTM) 1Q'12 DSCR was 0.85x, compared to 0.84x
at YE2011 and  0.80x at YE2010. DSCR at issuance was 1.44x.

The Rating Outlook on the class A-M remains Negative reflecting several highly 
leveraged loans; nine of the top 15 loans have Fitch loan-to-value () ratios 
over 90%. In addition, several of these loans have upcoming lease rollovers, 
which remains a concern.  

Fitch has downgraded the following classes:

--$196.5 million class A-M to 'Asf' from 'AAsf', Outlook Negative;

--$152.3 million class A-J to 'CCsf' from 'CCCsf'', RE 50%;

--$41.8 million class B to'Csf' from 'CCsf', RE 0%.

Fitch has affirmed the following classes: 

--$41 million class A-3 at 'AAAsf', Outlook Stable;

--$1.01 billion class A-4 at 'AAAsf', Outlook Stable;

--$96.6 million class A-1A at 'AAAsf', Outlook Stable;

--$19.7 million class C at 'Csf', RE 0%; 

--$31.9 million class D at 'Csf', RE 0%;

--$17.2 million class E at 'Csf', RE 0%; 

--$0.8million class F at 'Dsf'; RE 0%. 

Classes G, H, J, K, L and M have been reduced to zero due to realized losses and
remain at 'Dsf', RE 0%. Classes A-1 and A-2 have paid in full. Fitch does not 
rate classes N, O or P. 

Fitch has withdrawn the rating of the interest only class XW at prior review. 

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions 
is available in the Dec. 21, 2011 report, 'Surveillance Methodology for U.S. 
Fixed-Rate CMBS Transactions', which is available at 'www.fitchratings.com' 
under the following headers:

Structured Finance >> CMBS >> Criteria Reports 
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been 
compensated for the provision of the ratings.

Applicable Criteria and
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