Press Release

DBRS Confirms Ratings on UBS-Barclays Commercial Mortgage Trust 2012-C4

CMBS
November 10, 2015

DBRS Limited (DBRS) has today confirmed all classes of UBS-Barclays Commercial Mortgage Trust 2012-C4 as follows:

-- 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-5 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the current performance of the transaction. The collateral consists of 89 fixed-rate loans secured by 131 commercial properties. According to YE2014 financials, the pool had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.99 times (x) and 11.8%, respectively, compared with the DBRS UW figures of 1.78x and 10.0%, respectively. As of the October 2015 remittance, the pool has an aggregate balance of $1.41 billion, representing a collateral reduction of 3.1% since issuance due to scheduled loan amortization. DBRS has highlighted one loan below that is not currently on the servicer’s watchlist, but has recently experienced a decline in performance.

The Bedford Green loan (Prospectus ID#11, 2.1% of the current pool) is secured by a 121,199 sf grocery-anchored retail center located in Bedford Hills, New York. The loan was formerly on the servicer’s watchlist, from February 2014 through December 2014, due to a low YE2013 DSCR of 0.86x; however, the YE2014 DSCR improved to 1.1x. The initial decline in performance was caused by a low rental rate of the anchor tenant and a decline in occupancy. The anchor tenant, ShopRite (31.6% of the net rentable area (NRA), December 2016 lease expiration), previously paid a rental rate of $9.58 psf triple net (NNN); however, as of January 2014, its rental rate was reset to $23.53 psf NNN (85.0% of market rent). The tenant currently pays a rental rate of $20.67 psf compared to the North submarket’s average rental rate of $27.72 psf NNN as of Q3 2015. The subject’s occupancy rate declined to 76.6% from 94.5% after the former second-largest tenant, Mavis Tire Supply (Mavis) (17.9% of the NRA), vacated the property at lease expiration in December 2012, leaving the space dark until August 2013. As of August 2013, Premier Collection (9.6% of the NRA) assumed a portion of Mavis’ former space on a one year lease at $3.74 psf NNN, compared to Mavis’ former rental rate of $5.90 psf NNN. Premier Collection is currently on a month-to-month lease paying a rental rate of $4.10 psf. According to the September 2015 rent roll, the occupancy rate has rebounded to 93.4% with an average rental rate of $21.99 psf NNN compared to $17.62 psf NNN at YE2013. While the YE2014 DSCR improved and the loan was subsequently removed from the watchlist, total operating expenses have remained 22.7% above issuance figures, primarily as a result of increases in General & Administrative (up 97%), Repairs & Maintenance, (up 66%) and Management Fees (up 21%). Additionally, Marshall’s (8.0% of the NRA) had a lease expiration as of October 2015; however, the space has been dark since March 2013. The borrower has indicated that there are no potential tenants to fill the space at this time. Given the rise in operating expenses, the upcoming lease expiration of Shoprite and Marshall’s departure, DBRS modeled this loan with an elevated probability of default as short term future performance is expected to decline.

There are currently 12 loans on the servicer’s watchlist, representing 11.5% of the current pool balance. Six of these loans (12.7% of the current balance) were flagged due to issues of deferred maintenance, while two loans (3.3% of the current pool) were flagged as a result of upcoming tenant rollover. According to YE2014 financials, the 12 loans currently on the watchlist had a WA DSCR and WA debt yield of 1.43x and 10.8%, respectively, compared with the DBRS UW figures of 1.6x and 10.0% at issuance, respectively. One of the loans on the watchlist is highlighted below.

The Evergreen Plaza loan (Prospectus ID#12, 1.9% of the current pool) is secured by an 89,468 sf grocery-anchored retail center located in Staten Island, New York. The loan was added to the servicer’s watchlist in July 2015 due to an increase in total operating expenses and the anchor tenant’s affiliation with the Great Atlantic & Pacific Tea Company (A&P), which declared bankruptcy for the second time in July 2015. As of YE2014 financials, the loan had a DSCR of 1.11x compared to the DBRS UW figure of 1.54x. The decline in performance was a result of a 33.0% increase in operating expenses since issuance; primarily attributed to General & Administrative (up 97%) and Repairs & Maintenance (up 95%) costs. The EGI also experienced a 10.8% decline; however, it appears this figure was artificially suppressed due to the timing of tenant’s expense reimbursement payments. As of Q2 2015, the loan had an annualized DSCR of 1.52x as rental reimbursements have normalized, but operating expenses remain 26.0% above issuance figures. The largest tenant, Pathmark (70% of the NRA) is a grocery-chain, which was a subsidiary of the A&P. As of October 19, 2015, the lease on the subject Pathmark was purchased by Key Food Stores Cooperative Inc., which is reportedly continuing to operate the store under normal business conditions with fully stocked shelves. The current lease extends through July 2022; however, DBRS modeled this loan with an elevated probability of default due to the uncertainty surrounding the subject’s future leasing activity and increased operating expenses.

At issuance, DBRS assigned an investment-grade shadow rating to one loan, 1000 Harbor Boulevard (Prospective ID#53, 0.5% of the current pool balance). DBRS has today confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

The DBRS analysis included an in-depth review of the 15 largest loans in the transaction, the shadow-rated loan and the loans on the servicer’s watchlist, which collectively represent 64.7% 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. The October 2015 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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are CMBS North American Surveillance (January 2015) and North American CMBS Rating Methodology (June 2015), which can be found on our website under Methodologies.

Ratings

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  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
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