DBRS Morningstar Confirms All Classes of UBS-Barclays Commercial Mortgage Trust 2012-C3, Two Trends Changed to Positive

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

-- 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 AA (low) (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)

DBRS Morningstar changed the trend on Classes B and C to Positive from Stable; all other trends are Stable. In addition, DBRS Morningstar discontinued the rating on Class A-3 as it was repaid in full with the February 2020 remittance.

The rating confirmations and Positive trends reflect the overall strong performance of the transaction. As of the March 2020 remittance, 69 of the original 76 loans remained in the pool with the collateral reduction of 26.3% as a result of scheduled loan amortization and loan repayments. Loans representing 24.3% 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 1.82 times (x) and 13.5%, respectively, compared with the DBRS Morningstar figures derived at issuance of 1.59x and 10.2%, respectively.

As of the March 2020 remittance, one loan (representing 2.5% of the pool) was in special servicing and eight loans (9.0% of the pool) were on the servicer’s watchlist.

The specially-serviced loan, Great Northeast Plaza (Prospectus ID#11; 2.5% of the pool), transferred to the special servicer in November 2018 and became real estate owned in September 2019. The loan is secured by an anchored retail property in Philadelphia. Performance declined following the departure of Sears (81.0% of the net rentable area) in early 2019. Based on a discount to the recent appraised value of $25.1 million, DBRS Morningstar believes the loss severity could approach 50.0% at resolution.

All eight loans on the servicer’s watchlist were flagged for performance-related reasons. The largest loan, Cooper Retail Portfolio (Prospectus ID #19; 1.7% of the pool) is also on the DBRS Morningstar Hotlist because of occupancy concerns after the largest tenants at two of the portfolio’s three shopping centers vacated in 2019. For additional information on that loan, please see the loan commentary in the DBRS Viewpoint platform, for which information has been provided, below. For watchlisted and other loans showing significantly increased risks from issuance, a probability of default penalty was applied in the analysis for this review.

DBRS Morningstar does note the transaction’s exposure to the concentration of retail properties in the top 10 non-defeased loans in the pool, a factor that is particularly noteworthy given the 2020 Coronavirus Disease (COVID-19) outbreak and its effect on retail traffic nationwide as cities and governors as well as company CEOs have taken measures to curtail viral spread by ordering stores and restaurants closed. Six of the pool’s 10 largest loans are backed by retail properties. Outside of the pool’s only specially serviced asset, all of those loans have generally maintained stable performance to date.

A description of how DBRS Morningstar considers ESG 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#11 – Great Northeast Plaza (2.5% of the pool)
-- Prospectus ID#16 – Cooper Retail Portfolio (1.7% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer 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 dbrsmorningstar.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 dbrsmorningstar.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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277