Fitch Downgrades 1 Class & Upgrades 2 Classes of Wachovia Bank's Series 2004-Whale 3.

CHICAGO -- Fitch Ratings downgrades and removes from Rating Watch Negative (RWN) the following class of Wachovia Bank's commercial mortgage pass-through certificates, series 2004-Whale 3:

-- $27.4 million class L to 'BB' from 'BBB-'.

The following classes are upgraded by Fitch:

-- $2.8 million class H to 'AAA' from 'BBB+';

-- $23.8 million class J to 'AAA' from 'BBB'.

In addition, the following classes are affirmed by Fitch:

-- Interest-only class X-1B 'AAA';

-- $26.1 million class K at 'BBB-'.

The downgrade of class L is due to decreased operating performance for the Adams Mark Hotel property. The upgrades to classes H and J reflect increased credit enhancement from the payoff of nine loans since issuance, representing 91.6% of the transaction.

Fitch continues to have concerns with the Adams Mark Hotel loan, which is now the sole remaining loan in the transaction. In addition to the trust debt of $80 million ($65,306 per room), there is a $15 million junior participation held outside the trust.

Fitch's net cash flow (NCF), based upon year-end (YE) 2005 operating numbers is down approximately 40% when compared to Fitch's issuance NCF. While this is up slightly from YE 2004 results, the overall decline in NCF is significant enough to warrant the downgrade of class L.

The 1,225-room hotel, located in downtown Denver near the convention center, continues to under-perform among its competition. According to the Dec. 2005 STAR Summary Report, the property had the weakest performance across occupancy, average daily rate and revenue per available room for its competitive set. While this can partially be attributed to some renovation work that was completed during the course of 2004, it does not account for the entire decline in performance which is also attributed to a general economic downturn affecting the hotel's main focus, the group sector. In addition, Fitch will be closely monitoring the future performance of the hotel as a brand new Hyatt hotel, adjacent to the convention center, opened in Dec. 2005 and is expected to serve as additional competition for the property.

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