DBRS Confirms All Classes of UBS-Barclays Commercial Mortgage Trust 2012-C3

DBRS Limited (DBRS) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C3, issued by UBS-B Barclays Commercial Mortgage Trust 2012-C3 as follows:

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

All trends are Stable.

The rating confirmations reflect the overall healthy performance of the transaction since issuance. As of the May 2018 remittance, 70 of the original 76 loans remained in the pool, with an aggregate principal balance of $875.0 million and a 19.1% collateral reduction since issuance as a result of scheduled amortization and the repayment of six loans, including the second-largest loan at issuance, Apache Mall. All loans structured with a five-year term have been successfully repaid, with the bulk of the remaining loans maturing in 2022.

The pool benefits from defeasance collateral, as six loans, representing 9.0% of the current pool balance, are fully defeased. There have been no losses to the trust to date; however, there is one loan in special servicing as of the May 2018 remittance in Summit Village Apartments (Prospectus ID #29, 1.14% of the pool). DBRS expects a loss will be incurred at liquidation, contained to the unrated Class G certificates. For additional information on the DBRS analysis and outlook for that loan, please see the DBRS Viewpoint platform, for which information is provided below.

Although the pool benefits from a healthy amount of repayment and a strong concentration of defeased collateral (factors that contributed to the upgrades for five classes at last review), there are challenges in the high concentration of loans secured by retail properties, which represent approximately 36.0% of the transaction balance as of May 2018. In addition, there are six loans, representing 8.4% of the pool, on the servicer’s watchlist, with all but one of those loans secured by a retail property.

Of the remaining 64 non-defeased loans, 57 of those loans, representing 81.7% of the pool, reported year-end net cash flow (NCF) figures as of the May 2018 remittance. Those 57 loans had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.80 times (x) and 12.9%, respectively, compared with the YE2016 figures of 1.77x and 12.7%, respectively.

Of the six loans on the watchlist, DBRS considers Prospectus ID#11, Great Northeast Plaza, representing 2.4% of the current pool balance, the most concerning. The property lost its anchor tenant, Sears (81.0% of NRA) in April 2018 and DBRS expects the in-place coverage to fall below 0.50x with the loss of the Sears rent at lease expiry in May 2019 (or before, in the event the company declares bankruptcy).

At issuance, DBRS assigned an investment-grade shadow rating to two loans, Prospectus ID#1, 1000 Harbor Boulevard and Prospectus ID#8, Franklin Towne Center. Both shadow ratings were supported by the investment-grade rating for the long-term tenant. With this review, DBRS has confirmed the characteristics of both loans remain in line with an investment-grade shadow rating.

Classes X-A and X-B are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1, 1000 Harbor Boulevard
-- Prospectus ID#3, Reisertown Plaza
-- Prospectus ID#8, Franklin Towne Center
-- Prospectus ID#10, GPB Portfolio II
-- Prospectus ID#11, Great Northeast Plaza
-- Prospectus ID#29, Summit Village Apartments

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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