DBRS Confirms Ratings of MSC Mortgage Securities Trust, 2012-C4

DBRS has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C4 issued by MSC Mortgage Securities Trust, 2012-C4:

-- 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 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)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)

All trends are Stable. DBRS does not rate the first lost piece, Class H.

The collateral consists of 38 fixed-rate loans secured by 77 commercial properties. As of the January 2014 remittance report, the pool has a balance of approximately $1.08 billion, representing a collateral reduction of approximately 2.1% since issuance in March 2012. Overall, the pool has reported stable performance, with the largest 15 loans in the transaction reporting a weighted-average debt service coverage ratio (DSCR) and debt yield of 1.76 times (x) and 12.6%, respectively, according to YE2012 reporting.

At issuance, DBRS shadow-rated two loans, representing 15.0% of the current pool balance, investment grade. DBRS has today confirmed that the performance of the loans remains consistent with investment-grade loan characteristics.

As of the January 2014 remittance report, there is one loan in special servicing and four loans on the servicer’s watchlist, representing 1.9% and 5.7% of the current pool balance, respectively. The specially serviced loan and one loan on the servicer’s watchlist are highlighted below:

The Independence Place – Fort Campbell loan (Prospectus ID#18) is secured by a multifamily property in Clarksville, Tennessee, which serves as military housing for servicemen and women of Fort Campbell. The loan transferred to special servicing in October 2013 after the borrower ceased making debt service payments. The loan was originally added to the servicer's watchlist for a low DSCR, which was 1.03x at YE2012 and 0.72x as of Q2 2013. While a foreclosure action has yet to be filed, the special servicer installed Elmington Property Management as receiver, which has a portfolio of seven multifamily properties totaling over 1,100 units in Kentucky and Tennessee. At issuance, the property was valued at $30.6 million; however, based on an in-place NOI of $1.54 million, the new appraised value is expected to be lower. An updated third-party appraisal for the property is expected shortly. According to the November 2013 rent roll, the property was 88.0% occupied with average rental rates of $450 per bed. Rent includes utilities, cable and Internet with property amenities including a swimming pool, fitness center, basketball courts, a computer lab, sand volleyball court, clubhouse and tanning beds. According to the Department of Defense, 4,800 personnel (approximately 16% of the active duty force) were deployed in the winter of 2013/2014, which has the potential to negatively affect the subject. DBRS is awaiting a response from the servicer regarding the receiver’s operational plans given this recent development.

The Hilton Springfield loan (Prospectus ID#15) is secured by a full-service hotel in Springfield, Virginia, approximately 14 miles southwest of the Washington D.C. central business district. The loan was added to the servicer's watchlist for a Q2 2013 DSCR of 0.73x, which is a dramatic decrease from YE2012, when the hotel reported a DSCR of 2.38x at an occupancy rate of 65.5%. According to Q3 2013 reporting, the DSCR has fallen further to 0.55x as room revenue is down more than $1 million and food and beverage expenses have increased by $2.1 million since YE2012. According to the borrower, the performance decline is a result of heavy competition in the area as there are six competing hotels located within a mile of the subject, as well as the negative occupancy effects of the prolonged government sequester. As of the July 2013 STR report, the T12 occupancy rate was 56.3%, average daily rate was $149.53 and revenue per available room was $84.21. These figures represent year-over-year decreases of 13.4%, 8.1% and 20.5%, respectively. Despite the recent performance decline, the loan remains current. Amenities at the property include a fitness center, an outdoor pool, a business center and 22,000 square feet of meeting space. The property features a restaurant on the first floor and offers free shuttle service to and from the Springfield-Washington Metro station.

The DBRS analysis included an in-depth review of the top 15 loans, the shadow-rated loans, the specially serviced loan and loans on the servicer’s watchlist, which represent approximately 81.1% of the current pool balance.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool and loans on the servicer’s watchlist. The January 2014 Monthly CMBS Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

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

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

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (November 2012), which can be found on our website under Methodologies.