DBRS Confirms Ratings on BAMLL Commercial Mortgage Securities Trust 2012-CLRN

DBRS has today confirmed the ratings for the following classes of BAMLL Commercial Mortgage Securities Trust 2012-CLRN, Commercial Mortgage Pass-Through Certificates, Series 2012-CLRN (BAMLL 2012-CLRN). The trends are Stable.

-- Class A at AAA (sf)
-- Class X-1A at AAA (sf)
-- Class X-1B 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 (low) (sf)
-- Class X-2A at BB (low) (sf)
-- Class X-2B at BB (low) (sf)

Collateral for the $335.0 million transaction consists of a portfolio of 47 extended-stay hotels located in 18 states throughout the U.S. In addition to the mortgage loan, there is $165 million of subordinate mezzanine debt outside of the trust. The loan sponsors purchased the properties in 2007 for $748 million and subsequently spent $178.5 million on capital improvements, bringing their total cost basis to $926.5 million. The proceeds of the subject financing were used, along with approximately $89.6 million of new cash equity, to pay off prior debt of $568 million in full. There are three loan sponsors, two of which are funds managed by Clarion Partners, and one of which is a direct subsidiary of the Abu Dhabi Investment Authority. Each of the properties is operated as a Residence Inn by Marriott or Homewood Suites by Hilton.

The portfolio benefits from a significant portion of the allocated loan amount being secured by properties located in strong markets with significant barriers to entry. While only a few of the properties are located in what would be considered truly urban environments, many are located in desirable suburban markets with strong demographics and limited new supply expected in the near future. The portfolio does have a significant concentration of properties in smaller or weaker markets by property count, but these properties generate lower cash flow and have lower allocated loan amounts than the properties in superior locations.

Since issuance, the servicer has compiled an OSAR that reports a T-12 March 2013 portfolio NCF of $50,742,711.9, which represents a 7.6% increase over the Issuer underwritten (UW) level and a 9.4% increase over the DBRS UW level. As this transaction was closed more recently, this cash flow only includes an additional few months of reporting than were available when DBRS originally reviewed the loan and is not considered as a sustainable increase in cash flow. As such, for the purposes of this review, DBRS used the DBRS UW net cash flow from issuance when analyzing the loan. DBRS intends to analyze future OSARs, as they are provided, to assess the true performance improvement of the portfolio properties. Based on the DBRS UW NCF and the cash flow reported in the most recent OSAR, the performance of the portfolio is at least in line, if not stronger than at issuance, and the ratings confirmations were considered appropriate.

The loan has minimal default risk during the fully extended loan term, as the DBRS Term debt service coverage ratio is high, above 2.0x. Further, the DBRS value represents a 29.5% discount to the appraised value, results in a modest DBRS loan-to-value (LTV) of 70.4% and low DBRS LTV through the BBB (low) rated class of 59.0%.

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

All classes are privately placed pursuant to Rule 144a. The Class X-1A, X-1B, X-2A and Class X-2B balances are notional. DBRS ratings on interest-only 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.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.