DBRS Morningstar Confirms Ratings on UBS-Citigroup Commercial Mortgage Trust, Series 2011-C1

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates (the Certificates) Series 2011-C1, issued by UBS-Citigroup Commercial Mortgage Trust, Series 2011-C1 as follows:

-- Class D at CCC (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class G at C (sf)

All classes have ratings that do not typically carry trends in commercial mortgage backed securities (CMBS).

The rating confirmations reflect DBRS Morningstar’s continued concern for the remaining two loans in the transaction, both of which are distressed assets in special servicing with significant value declines from issuance. As of the January 2023 remittance, the trust reported a balance of $82.5 million, representing a collateral reduction of 87.8% since issuance.

The Poughkeepsie Galleria loan (Prospectus ID#2; 74.1% of the pool) is secured by the borrower’s fee-simple interest in a 691,325 square foot (sf) portion of a 1,206,057 sf regional mall in Poughkeepsie, New York. The loan transferred to the special servicer in April 2020 for imminent monetary default. A foreclosure complaint and receivership motion were filed in August 2022, but the special servicer and the borrower have initiated settlement discussions that are ongoing.

Per the August 2022 appraisal, the property was valued at $69.1 million, down slightly from the December 2021 value of $69.2 million but decreased by 70.8% from the issuance value of $237.0 million. Based on the November 2022 rent roll, the collateral was 60.3% occupied, compared with the June 2022 occupancy rate of 57.0% and issuance occupancy rate of 87.7%. The largest collateral tenants are Regal Cinemas (10.2% of the net rentable area (NRA), lease expires in December 2026), Dick’s Sporting Goods (7.8% of the NRA, lease expires in February 2028), and RPM Raceway (5.6% of the NRA, lease expires in November 2024). The parent company of Regal Cinemas, Cineworld, filed for Chapter 11 bankruptcy in September 2022 but announced a bankruptcy settlement with its landlords and lenders in October 2022, allowing the company to borrower $150 million and make a $1 billion debt repayment. In addition, 51 locations are expected to close to reduce costs while Cineworld works with the landlords to preserve its other theaters. To date, the subject location was not included in the list of store closures.

Non-collateral anchors include Target and Macy’s, while the spaces previously anchored by a collateral Sears and JCPenney have been vacant since 2020. There is significant tenant rollover risk as tenants representing 21.8% of the NRA have leases that have expired or will be expiring in the next 12 months. According to the November 2022 tenant sales report, Regal Cinema reported sales of $328,000 per screen for the trailing 12 months ended November 30, 2022, while Dick’s Sporting Goods reported sales of $254.20 per square foot (psf) for the same period. Total in-line sales were reported at $336 psf, compared with the issuance sales figure of $356 psf. The subject’s performance remains depressed with financials for the trailing nine months ended September 30, 2022, reporting a debt service coverage ratio (DSCR) of 0.72 times (x) compared with the YE2021, YE2020, and YE2019 DSCRs of 0.82x, 0.42x, and 0.88x, respectively. DBRS Morningstar maintained its liquidation scenario in its analysis, which implies a loss severity to the trust loan in excess of 65%.

The Marriott Buffalo Niagara (Prospectus ID#9; 25.9% of the pool) loan is secured by a 356-key full-service hotel in Amherst, New York. The loan was transferred to special servicing in April 2020 for imminent monetary default and became real estate owned in May 2022. According to a Buffalo News article dated December 2022, Visions Hotel placed the winning bid of $14.5 million to purchase the subject, which is below the July 2022 appraisal value of $18.2 million and the outstanding loan balance of $21.3 million. The transaction is expected to close within 90 to 120 days. With this review, DBRS Morningstar analyzed this loan with a liquidation scenario, which results in a loss severity in excess of 45%.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no environmental/social/governance 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 (May 17, 2022).

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 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.

DBRS Morningstar notes that a sensitivity analysis was not performed for this review as the transaction is in wind down, with only a few remaining loans. In those cases, the DBRS Morningstar ratings are typically based on a recoverability analysis for the remaining loans.

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

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