DBRS Confirms All Classes of UBS-Barclays Commercial Mortgage Trust 2012-C4

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C4 issued by UBS-Barclays Commercial Mortgage Trust 2012-C4 as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (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, with the exception of Classes B and C, for which the Positive trends assigned at the last review have been maintained.

The rating confirmations reflect the overall stable performance of the transaction; the two Positive trends reflect the collateral reduction since issuance and the overall healthy cash flow growth for the underlying loans. At issuance, the pool consisted of 89 fixed-rate loans secured by 131 commercial properties. As of the September 2018 remittance, there are 82 loans remaining in the pool with a remaining trust balance of $1,261 million, representing a collateral reduction of 13.4% due to loan repayments and scheduled amortization that resulted in the full repayment of the Class A-1 and Class A-2 bonds. In addition, there are 11 loans, representing 5.6% of the pool balance, that are fully defeased.

Approximately 87.9% of the pool, or 67 of the 82 remaining loans, reported YE2017 financials. Based on the most recent year-end financials, the pool is reporting a strong weighted-average (WA) debt service coverage ratio (DSCR) of 1.84 times (x) and WA debt yield of 10.7%, which is in line with the WA DBRS Term DSCR of 1.82x and WA DBRS debt yield of 10.1% derived at issuance for the remaining loans in the pool.

There are 11 loans, representing 13.8% of the pool balance, that are on the servicer’s watchlist. Three loans were placed on the watchlist due to deferred maintenance and another four loans are being monitored for lease rollover. Three loans are on the watchlist for cash flow declines related to drops in occupancy related to a renovation or repositioning of the respective collateral property. When merited, stressed scenarios were applied for these loans to reflect the increased risks in the performance declines or potential for future revenue losses.

As of the September 2018 remittance, there are two loans, representing 1.0% of the current pool balance, in special servicing. The Worthington at the Beltway loan (Prospectus ID#52; 0.5% of the pool balance) transferred to the special servicer in December 2016 for imminent non-monetary default after the collateral multifamily property sustained substantial fire damage in 2013 and the insurance coverage was reportedly not sufficient to cover the necessary repairs. In addition, the sponsor demolished 20 affected units without lender consent. The loan remains current, and property cash flows remain healthy, with a strong DSCR and physical occupancy rate for the property (as based on the adjusted unit count from issuance). The special servicer is pursuing foreclosure, and lawsuits have been filed by both the sponsor and the servicer, with those proceedings pending as of the date of this press release. Due to the uncertainty of the litigation, DBRS applied a stressed cash flow scenario for the loan to increase the probability of default.

The Hickory Commons loan (Prospectus ID#57; 0.5% of the pool balance) transferred to the special servicer in February 2017 for imminent default and became real estate owned as of July 2017 following a deed in lieu. The special servicer has been marketing the retail property for sale and lease since acquiring the asset. DBRS applied a liquidation scenario to the pool for the subject loan, with the most recent appraisal suggesting a loss severity in excess of 30.0%.

At issuance, DBRS shadow-rated the 1000 Harbour Boulevard loan (Prospectus ID#53; 0.54% of the current pool balance) investment grade, and with this review, DBRS confirms that the performance of the loan remains consistent with investment-grade loan characteristics. The loan is secured by a ten-story office building located in Weehawken, New Jersey, that is 95.5% occupied by UBS Group AG with a lease expiration of December 2028. The loan reported a YE2017 DSCR of 1.35x, which is consistent with prior years.

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:

-- Visalia Mall (Prospectus ID#3; 5.9% of the pool balance)
-- Newgate Mall (Prospectus ID#6; 4.6% of the pool balance)
-- Sun Development Portfolio (Prospectus ID#9; 2.5% of the pool balance)
-- Worthington at the Beltway (Prospectus ID#52; 0.5% of the pool balance)
-- Hickory Commons (Prospectus ID#57; 0.5% of the pool balance)

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 commercial mortgage-backed securities 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 North American CMBS 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.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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