Fitch Takes Various Actions on COBALT 2007-C3

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded one class, downgraded one class, and affirmed 15 classes of Cobalt CMBS Commercial Mortgage Trust's (COBALT) commercial mortgage pass-through certificates series 2007-C3. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade to class A-M reflects the increase in credit enhancement from continued pay down, coupled with increased defeasance since Fitch's last review. The downgrade to class G reflects incurred losses on the subordinate tranche. Fitch modeled losses of 14.1% of the remaining pool; expected losses on the original pool balance total 15.0%, including $106.4 million (5.3% of the original pool balance) in realized losses to date. Fitch has designated 30 loans (43.6%) as Fitch Loans of Concern, which includes four specially serviced assets (4.7%).

As of the February 2016 distribution date, the pool's aggregate principal balance has been reduced by 30.8% to $1.4 billion from $2.02 billion at issuance. Eight loans (18.1%) are fully defeased, including the $145 million Charles River Plaza North loan (10.4% of the pool). Interest shortfalls are currently affecting classes H through P.

The largest contributor to expected losses is the Irvine EOP San Diego Portfolio loan (9.8% of the pool), the second largest loan in the pool. The interest only (IO) loan is collateralized by seven properties consisting of six class A and B office buildings and one single-tenant restaurant all located in San Diego, CA. The aggregate square footage for the portfolio is 380,954 square feet (sf). Per the January 2016 rent rolls the portfolio is 90% occupied, an improvement from June 2010, which reported at 69%. Three of the properties are 100% leased; the restaurant (2.3%) is currently vacant.

Despite occupancy improvements, property performance remains below underwritten levels with the net operating income (NOI) debt service coverage ratio (DSCR) reporting at 0.90x for three month year to date (YTD) September 2015, 0.81x for year-end (YE) June 2014, and 0.59x for YE 2013. Leases for approximately 30% of the collateral's net rentable area (NRA) are scheduled to expire by year end 2016, with an additional 21% of the NRA to expire by December 2017. The loan remains current and is with the master servicer.

The next largest contributor to expected losses is the Arbors at Broadlands loan (3.6%), the fifth largest loan in the pool. The IO loan is secured by a 240-unit multifamily property located in Ashburn, VA (approximately eight miles north-west of the Dulles Airport). The property has never met its underwritten rent projections and performance has remained low since securitization. The September 2015 rent roll reported occupancy at 96%, compared to 75% at issuance.

Despite high occupancy NOI DSCR remains low, at 0.99x and 1.0x for YTD September 2015 and YE December 2014, respectively. Per Reis' fourth-quarter 2015 report, overall vacancy was at 4.2% for the Suburban VA, Loundon County Submarket, with asking rents of $1,655 per month, compared to average in-place rents of $1,699 per month at the subject property. The loan has remained current since issuance and is with the master servicer.

The third largest contributor to expected losses is the Sheraton Suites - Alexandria, VA loan (3.9%), the fourth largest loan in the pool. The loan is secured by a 247-key full-service hotel located in the Old Town section of Alexandria, VA, just outside of Washington, D.C.. Performance has shown gradual signs of improvement since 2013, after exhibiting declining occupancy and room revenue's since 2011. The trailing twelve month (TTM) ended December 2015 reported occupancy of 77.3%, ADR of $149.31, and RevPAR of $115.48, compared with 73.6%, $144.73, and $106.45, respectively, at YE December 2014. Per the December 2015 Smith Travel Research Report (STR), the property is outperforming in occupancy and underperforming for ADR RevPAR the competitive set which reports TTM occupancy at 75.1%, ADR at $166.21, and RevPAR at $124.74. The loan, which has been amortizing since July 2012, reported an NOI DSCR of 1.13x for YE 2015 and 1.0x for YE 2014. The loan remains current and is with the master servicer.

RATING SENSITIVITIES

The Outlook on classes A-4, A-1A, and A-M are expected to remain Stable as the classes benefit from increasing credit enhancement and continued delevering of the transaction through amortization and repayment of maturing loans. Fitch had applied additional stresses to maturing loans when considering the upgrade to account for refinance risk.

DUE DILIGENCE USAGE

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

Fitch has upgraded the following classes as indicated:

--$201.7 million class A-M to 'Asf' from 'BBBsf'; Outlook Stable.

Fitch has downgraded the following classes as indicated:

--$12.1 million class G to 'Dsf' from 'Csf'; RE 0%.

Fitch has affirmed the following classes:

--$662.4 million class A-4 at 'AAAsf'; Outlook Stable;

--$234.4 million class A-1A at 'AAAsf'; Outlook Stable;

--$153.8 million class A-J at 'CCCsf'; RE 70%;

--$40.3 million class B at 'CCCsf'; RE 0%;

--$20.2 million class C at 'CCsf'; RE 0%;

--$25.2 million class D at 'CCsf'; RE 0%;

--$20.2 million class E at 'Csf'; RE 0%;

--$25.2 million class F at 'Csf'; RE 0%;

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

--Class J at 'Dsf'; RE 0%;

--Class K at 'Dsf'; RE 0%;

--Class L at 'Dsf'; RE 0%;

--Class M at 'Dsf'; RE 0%;

--Class N at 'Dsf'; RE 0%;

--Class O at 'Dsf'; RE 0%.

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

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. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=999958

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=999958

Endorsement Policyhttps://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/20160224006576/en/

Fitch Ratings
Primary Analyst:
Benson Thomas, +1-212-908-0645
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Britt Johnson, +1-312-606-2341
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• UK’s new PM Burnham pledges no economic risks, plans cost relief
• DC BLOX Selected as Consortium member by U.S. Department of Energy’s National Nuclear Security Administration for AI Data Center and Energy Project
• Sun Communities, Inc. Announces Date for Second Quarter 2026 Earnings Release and Conference Call