DBRS Morningstar Confirms All Classes of MSC Mortgage Securities Trust, 2012-C4

DBRS, Inc (DBRS Morningstar) 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-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class X-B at B (high) (sf)
-- Class G at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. As of the March 2020 remittance, 30 of the original 39 loans remain in the pool, with collateral reduction of 34.3% since issuance as a result of loan repayment, scheduled amortization, and the proceeds from one liquidation, which incurred a realized loss to the trust of $8.6 million in February 2017. To date, no loans are delinquent or in special servicing. The pool benefits from defeasance collateral as seven loans, representing 17.4% of the pool, are fully defeased. Based on the most recent year-end (YE) reporting, the pool had a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.72 times (x) and 13.7%, respectively, compared with the DBRS Morningstar Term figures derived at issuance of 1.56x and 10.9%, respectively.

As of the March 2020 remittance, there are five loans on the servicer’s watchlist, representing 23.4% of the pool, including the largest loan in the pool, The Shoppes at Buckland Hills (Prospectus ID#1, 15.7% of the pool). The collateral is secured by the in-line space of a 1.1-million-sf regional mall in Manchester, Connecticut, within the Hartford metropolitan statistical area. The cash flow declines in 2018 were the result of both falling income and increases in expenses. The loan’s DSCR has decreased annually since topping out at 1.45x at YE2016, ending YE2018 at 1.23x. The partial year financials ended in September 2019 showed further slippage to a 1.00x DSCR, despite mantinaining an occupancy rate of 97.0%. There’s additional risk to foot traffic at the mall as the noncollateral anchors include Sears, JCPenney, and Macy’s, although none have announced store closures at this location to date.

Among the other watchlisted loans, the Hilton Springfield loan (ProspectusID#15, 3.0% of the pool) is of the most concern from a performance standpoint. The 245-room full-service hotel in Springfield, Virginia, has not reported a DSCR above break-even since 2012. Its location near numerous governmental agencies has had an impact on performance because of a decrease in demand after federal budget cuts. In addition, the loan previously had a stint in special servicing and was returned as corrected in February 2015, after an additional contribution of equity from the borrower to fund a property improvement plan reserve and pay special-servicing fees. While the loan remains current to date, DBRS Morningstar notes the recent impact to the hospitality industry amid the Coronavirus Disease (COVID-19) outbreak, which has significantly reduced both business and leisure travel around the world. Hotels have been immediately affected with devastatingly low occupancy rates reported as of the most recent STR reporting. As such, this and other loans secured by hotel properties are likely to see a significant impact to near and moderate term cash flow. DBRS Morningstar is monitoring closely for developments.

A description of how DBRS Morningstar considers environmental, social, and governance (ESG) risk factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

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