DBRS Assigns Provisional Ratings to MSC 2012-C4

DBRS has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C4 to be issued by MSC 2012-C4 Mortgage Trust. The trends are Stable.

– Class A-1 at AAA (sf)
– Class A-2 at AAA (sf)
– Class A-3 at AAA (sf)
– Class A-4 at AAA (sf)
– Class A-S at AAA (sf)
– Class X-A at AAA (sf)
– Class X-B at AAA (sf)
– Class B at AA (sf)
– Class C at A (sf)
– Class D at BBB (high) (sf)
– Class E at BBB (low) (sf)
– Class F at BB (sf)
– Class G at B (sf)

The collateral consists of 38 fixed-rate loans secured by 77 multifamily, mobile home parks and commercial properties. The portfolio has a balance of $1,098,695,600. The pool consists of relatively low-leverage financing, with a DBRS weighted-average term debt service coverage ratio (DSCR) and debt yield of 1.56 times (x) and 10.9%, respectively. Of the collateral, 92.8% is located in suburban or urban locations and benefits from relatively diverse economies. Underwriting was generally prudent, and the average DBRS net cash flow variance was -6.2%. In addition, two loans, representing 14.9% of the pool, are shadow-rated investment grade by DBRS.

The pool is concentrated with the top three loan and top ten loan concentrations representing 27.7% and 62.7% of the pool, respectively, which is greater than other CMBS transactions issued in 2010 and 2011. This is mitigated by the fact that the top ten loans include four portfolios and a total of 33 properties. Generally, the largest ten loans are located in unique markets. The deal is further challenged by the concentration of hotel loans and other non-traditional property types (MHC, self-storage, military housing and student housing), which combined, represent, 33.5% of the pool. For hotel loans, the DBRS cash flow volatility incorporates significant cash stresses, which ultimately increases the probability of default for these loans. The remaining non-traditional property types were either included in a portfolio, had favorable DBRS debt yield metrics, have reported stable historical performance and are located in suburban markets, or have been modeled with below average cash flow stability which increases the loan’s term probability of default.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance which could result in upgrades or downgrades by DBRS after the date of issuance.

Finalization of ratings is contingent upon receipt of final documents conforming to information already received.

Notes:
All figures are in U.S. dollars unless otherwise noted.

All classes except A-1, A-2, A-3 and A-4 are privately placed pursuant to Rule 144a. The Class X-A and Class X-B balances are notional. DBRS ratings on X-A and X-B certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the interest-only certificate’s position within the transaction payment waterfall when determining the appropriate rating.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.