DBRS Morningstar Upgrades Ratings on Two Classes of WFRBS Commercial Mortgage Trust 2012-C9

DBRS Limited (DBRS Morningstar) upgraded its ratings on the following two classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C9 issued by WFRBS Commercial Mortgage Trust 2012-C9:

-- Class D to AAA (sf) from BBB (sf)
-- Class E to AA (low) (sf) from BB (sf)

In addition, DBRS Morningstar confirmed its ratings on the following class:

-- Class F at B (high) (sf)

All trends are Stable.

The rating upgrades reflect the increased credit support to the bonds, resulting from the repayment of 60 loans since DBRS Morningstar’s last rating action in November 2021. According to the November 2022 remittance, only two loans with a cumulative balance of $102.2 million, remain in the trust, representing collateral reduction of 90.3% since issuance and 85.6% since the last review. There have been minimal losses to date, with the unrated Class G reporting an outstanding balance of $36.9 million as of the November 2022 remittance.

The largest loan in the pool, Chesterfield Towne Centre (Prospectus ID#1; 90.0% of the current trust balance), is secured by a 1.01 million square foot (sf) regional mall in North Chesterfield, Virginia. The loan is sponsored by Brookfield Properties Group. The loan transferred to the special servicer in September 2022 after the borrower notified the lender that they would not be able to repay the loan upon maturity in October 2022. The borrower has requested a maturity extension and the special servicer is dual-tracking legal remedies as workout discussions are ongoing. The two largest tenants at the property account for 28.0% of the net rentable area (NRA): JCPenney (14.0% of NRA and operating on a ground lease through October 2050) and Macy's (14.0% of NRA with a lease through January 2026). According to the August 2022 rent roll, the property was 96.8% occupied; however, the physical occupancy rate is lower given that the former Sears anchor, which previously represented 14.0% of the NRA on an in-place ground lease through April 2046, closed in 2019. The space currently remains dark. The servicer reported net cash flow (NCF) and debt service coverage ratio (DSCR) for the trailing six month (T-6) period ended June 30, 2022 was $6.4 million ($12.7 million when annualized) and 1.85 times (x). This compares favorably with the YE2021, YE2020, and issuance DSCRs of 1.66x, 1.62x, and 1.52x, respectively. In addition, property performance has rebounded close to pre-pandemic levels when compared with the YE2019 DSCR of 1.89x . According to the tenant sales report for the T-12 period ended July 31, 2022, the property reported sales of $223 per square foot (psf), an increase from the YE2021 sales of $210 psf. The property is well located within a commercial corridor that includes prominent retailers such as Costco, Target, and Sam’s Club. Given the relatively strong performance of the underlying collateral as well as its good location, DBRS Morningstar believes this loan is well positioned to be resolved with minimal risk of loss to the rated bonds.

The Homewood Suites loan (Prospectus ID#21; 10.0% of the current trust balance) is secured by a 123-room extended-stay hotel in Houston that opened in 2009. The loan transferred to the special servicer in October 2020 and the asset has been real estate owned since August 2021. According to the April 2022 appraisal, the subject was valued at $10.5 million, an improvement from the April 2021 value of $9.0 million and slightly above the outstanding loan balance of $10.3 million, but still below the issuance value of $18.9 million. Based on the servicer’s updates, the property was scheduled to be auctioned in October 2022 and is expected to be resolved in the near term.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929.

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 this transaction.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loan including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

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

The principal methodology is the North American CMBS Surveillance Methodology (October 3, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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 [email protected].

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 [email protected].

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