DBRS Morningstar Confirms Ratings on WFRBS 2012-C9, Removes One Class From Under Review with Negative Implications
CMBSDBRS, Inc. (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2012-C9 issued by WFRBS Commercial Mortgage Trust 2012-C9 as follows:
-- Class A-3 at AAA (sf)
-- Class A-SB 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 (sf)
-- Class E at BB (sf)
-- Class F at B (high) (sf)
Class F was removed from Under Review with Negative Implications, where it was placed on August 6, 2020. All trends are Stable. Although all classes have a Stable trend, there are continued performance challenges for the underlying collateral, many of which have been driven by the impact of the Coronavirus Disease (COVID-19) pandemic. In addition to loans representing 4.5% of the pool being in special servicing as of the November 2020 remittance, DBRS Morningstar also notes that the pool has a high concentration of hospitality and retail properties, representing 18.1% and 39.6% of the pool balance, respectively. These property types have been the most severely affected by the initial impact of the coronavirus pandemic and, as such, those concentrations are suggestive of slightly increased risks for the pool, particularly at the lower rating categories, since issuance.
The transaction is concentrated by property type as 17 loans, representing 39.6% of the current trust balance, are secured by retail assets whereas 12 loans, representing 21.0% of the current trust balance, are secured by office assets. Lodging collateral makes up the third-largest concentration, representing 12 loans and 18.1% of the current trust balance. According to the November 2020 remittance, there are three loans, representing 4.5% of the current trust balance, in special servicing, both loans are secured by hotel assets: Hilton Garden Troy (Prospectus ID#18; 1.9% of the current trust balance), Homewood Suites Houston (Prospectus ID#27; 1.5% of the current trust balance) and Hilton Garden Inn Columbia (Prospectus ID#37; 1.1% of the current trust balance).
The Hilton Garden Troy is secured by a 127-room, full-service hotel property in Troy, New York, and was transferred to the special servicer in August 2020 given the ongoing effects of the coronavirus pandemic. The loan was already under some stress prior to 2020, as ongoing renovations impaired net cash flow in 2019, contributing to a reduction in NCF of 21% from 2018. As of October 2020, the servicer reported a modification has been completed and the loan is in process of being returned to the master servicer. At issuance, the collateral for the loan had an appraisal value of $27.0 million, equating to an LTV of 65%. DBRS Morningstar believes that while the subject is not immune to the short-term stressors from the pandemic, the property’s long-term outlook could be more positive than other tertiary lodging properties given the subject’s proximity to Rensselaer Polytechnic Institute, which has an enrollment of around 7,500 students, and Samaritan Hospital. Given that short-term demand remains suppressed, DBRS Morningstar will continue to monitor the situation for developments.
As of the November 2020 remittance, 64 of the original 73 loans remain in the pool, representing a collateral reduction of 29.6% since issuance. Nineteen loans, representing 33.0% of the current pool balance, are fully defeased. Additionally, there are 11 loans, representing 14.3% of the current trust balance, on the servicer’s watchlist per the November 2020 remittance. These loans are being monitored for a variety of reasons including low debt service coverage ratio (DSCR), occupancy, and deferred maintenance issues; however, the primary reason for many of the more recent transfers is for hospitality properties with a low DSCR stemming from disruptions related to the coronavirus pandemic. Based on the October 2020 remittance, the pool reported a weighted-average DSCR of 1.60 times (x) compared with the issuer’s issuance DSCR of 1.57x.
ESG CONSIDERATIONS
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.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), 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.
For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.
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.
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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