DBRS Upgrades Five Classes of UBS-Barclays Commercial Mortgage Trust 2012-C3

DBRS Limited (DBRS) has today upgraded the ratings on five classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C3, issued by UBS-Barclays Commercial Mortgage Trust 2012-C3 as follows:

-- Class C to A (high) (sf) from A (sf)
-- Class D to BBB (high) (sf) from BBB (sf)
-- Class E to BB (high) (sf) from BB (sf)
-- Class F to B (high) (sf) from B (sf)
-- Class X-B to BB (low) (sf) from B (high) (sf)

In addition, DBRS has confirmed the ratings for six classes as follows:

-- 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 B at AA (sf)

All trends are Stable.

In addition, DBRS has discontinued the rating for Class A-1 as it was repaid in full with the May 2017 remittance.

The rating upgrades reflect the strong overall performance of the portfolio since issuance, when the pool comprised 76 loans secured by 113 commercial properties. As of the May 2017 remittance, 74 of the original 76 loans remain in the pool, with three loans that are now fully defeased, representing 4.4% of the transaction balance. Since issuance, there has been a collateral reduction of 15.5% of the pool, as the result of scheduled amortization and the repayment of two loans, including the second-largest loan, Apache Mall (Prospectus ID#2), as of the May 2017 remittance. As of the most recent year-end reporting for the underlying loans that remain in the pool, the weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield are 1.76 times (x) and 12.3%, respectively. Those figures compare with the DBRS WA issuance figures of 1.59x and 10.2%, respectively. The Top 15 loans in the pool are reporting a WA DSCR and WA debt yield of 1.54x and 10.6%, respectively.

As of the May 2017 remittance report, there were two loans, representing 1.2% of the pool, on the servicer’s watchlist and two loans in special servicing, representing 1.5% of the pool. The two loans on the watchlist, show a WA YE2016 DSCR of 1.90x. One of the watchlisted loans is being monitored for a large increase in vacancy, and as such, DBRS analyzed this loan using a stressed cash flow scenario to increase the probability of default. The smaller watchlisted loan is being watchlisted for a tenant bankruptcy at the collateral property; however, the lease for the tenant in question has since been assumed by the company that purchased the tenant out of bankruptcy and DBRS expects the loan will be removed from the watchlist in the near term.

The largest of the specially serviced loans is Summit Village Apartments (Prospectus ID#29, 1.1% of the pool). That loan was transferred to special servicing in December 2016, after the borrower requested relief following several years of cash flow declines at the property.

At issuance, DBRS shadow-rated two loans investment grade, including the largest loan in the pool, Prospectus ID#1, 1000 Harbor Boulevard (12.4% of the pool) and another loan in the Top 15, Prospectus ID#8, Franklin Towne Center (3.1% of the pool). DBRS has today confirmed that the performance of the loans remains consistent with investment-grade loan characteristics.

The ratings assigned to Classes E and F materially deviate from the higher rating implied by the quantitative results. The deviations are warranted because sustainability of loan trends has not yet been demonstrated.

DBRS has provided updated loan-level commentary and analysis for both loans in special servicing, the larger and/or pivotal watchlisted loans, and for the largest 15 loans in the pool in the DBRS CMBS IReports platform. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register at or log into www.ireports.dbrs.com.

Notes:
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.

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

The principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.