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

The corresponding description of the action dated March 26, 2020, on Class B was updated to “Downgraded” from “Confirmed.” The rating itself has not changed and the rating history also remains the same.

DBRS, Inc (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C4 issued by UBS-Barclays Commercial Mortgage Trust 2012-C4:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. As of the March 2020 remittance, 80 of the original 89 loans remained in the pool, with collateral reduction of 16.4% as a result of loan repayment, scheduled amortization, and the proceeds from one liquidation that resulted in a realized loss to the trust of $0.4 million in December 2019. The pool benefits from defeasance collateral as 19 loans, representing 14.7% 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 2.15 times (x) and 11.8%, respectively, compared with the DBRS Morningstar Term figures derived at issuance of 1.53x and 9.4%, respectively.

DBRS Morningstar notes that the pool is concentrated in retail and hotel properties, representing 29.4% and 12.0% of the current pool balance, respectively. Two of the largest 15 loans in the pool are secured by hotel properties in Hilton Columbus (Prospectus ID #5; 4.3% of the pool) and Sun Development Portfolio (Prospectus ID #9; 2.4% of the pool). The Hilton Columbus loan has shown strong performance since issuance with healthy cash flow growth, but the Sun Development Portfolio reported a net cash flow (NCF) decline from issuance as of the YE2018 reporting. DBRS Morningstar notes the retail and, particularly for the immediate term, the hotel concentration of this pool are items to monitor amid the ongoing Coronavirus Disease (COVID-19) outbreak that has halted travel worldwide and resulted in mass temporary closures for restaurants, bars, and retail outlets as attempts to stem viral spread are put into place. DBRS Morningstar has requested specific details from the servicers about immediate performance effects on large hotel properties and, as such information is received, updated commentary will be provided on the DBRS Viewpoint platform, for which information has been provided, below.

As of the March 2020 remittance, three loans (5.5% of the pool) were in special servicing and 10 loans (17.3% of the pool) were on the servicer’s watchlist. Two loans in special servicing (0.8% of the pool) are relatively small; however, the largest loan, Newgate Mall (Prospectus ID#6; 4.8% of the pool), is more noteworthy.

The $58.0 million Newgate Mall loan is secured by a 500,000 square foot regional mall in Ogden, Utah, about 30 miles outside Salt Lake City. Based on the YE2019 financial reporting, the loan had a DSCR of 1.64x, representing a 57.5% NCF decline from the DBRS Morningstar figure derived at issuance. The mall lost a Sears anchor in April 2018 and occupancy has remained in the low 60% range since then. The most recently reported in-line sales figures suggest overall traffic remains healthy, but DBRS Morningstar notes that the subject property was sold and the trust loan assumed in August 2016., The sale price of $69.5 million was well below the issuance-appraised value of $83.0 million and the sale closed with all anchors in place. DBRS Morningstar assumed a conservative loss severity for this loan in the analysis for this review, reflective of concerns about further deterioration in value and low investor demand should the asset be liquidated.

Of the 10 loans on the servicer’s watchlist, the two largest are also secured by retail properties, Visalia Mall (Prospectus ID#3; 6.1% of the pool) and Manassas Retail Portfolio (Prospectus ID#10; 2.2% of the pool); however, both appear to be performing. Visalia Mall is secured by a regional mall in Visalia, California, approximately 40 miles south of Fresno and was flagged for an upcoming maturity in May 2020. The loan reported a YE2019 DSCR of 3.69x and is expected to repay in full at maturity. The Manassas Retail Portfolio is secured by a two-property shadow-anchored retail portfolio. The properties are located across the street from each other in Manassas, Virginia, an affluent neighborhood about 30 miles from Washington, D.C. Rollover exposure landed the loan on the servicer’s watchlist as a handful of small tenants have leases expiring in 2020; however, the loan reported a DSCR of 1.35x based on the most recent reporting, in line with historical figures. Given the diversity of the rent roll and strong occupancy to date, DBRS Morningstar did not consider the loan a material risk.

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#6 – Newgate Mall (4.8% 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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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