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Rating Action:

Moody's Affirms Eight and Downgrades Three Classes of MSC 2012-C4

Global Credit Research - 04 Aug 2017

Approximately $745 Million of Structured Securities Affected

New York, August 04, 2017 -- Moody's Investors Service (Moody's) has affirmed the ratings of eight classes and downgraded the ratings of three classes in Morgan Stanley Capital I Trust 2012-C4, Commercial Pass-Through Certificates, Series 2012-C4 as follows:

Cl. A-3, Affirmed Aaa (sf); previously on Dec 7, 2016 Affirmed Aaa (sf)

Cl. A-4, Affirmed Aaa (sf); previously on Dec 7, 2016 Affirmed Aaa (sf)

Cl. A-S, Affirmed Aaa (sf); previously on Dec 7, 2016 Affirmed Aaa (sf)

Cl. B, Affirmed Aa2 (sf); previously on Dec 7, 2016 Affirmed Aa2 (sf)

Cl. C, Affirmed A2 (sf); previously on Dec 7, 2016 Affirmed A2 (sf)

Cl. D, Affirmed Baa1 (sf); previously on Dec 7, 2016 Affirmed Baa1 (sf)

Cl. E, Downgraded to Ba1 (sf); previously on Dec 7, 2016 Affirmed Baa3 (sf)

Cl. F, Downgraded to Ba3 (sf); previously on Dec 7, 2016 Affirmed Ba2 (sf)

Cl. G, Downgraded to B3 (sf); previously on Dec 7, 2016 Affirmed B2 (sf)

Cl. X-A, Affirmed Aaa (sf); previously on Dec 7, 2016 Affirmed Aaa (sf)

Cl. X-B, Affirmed B1 (sf); previously on Jun 9, 2017 Downgraded to B1 (sf)

RATINGS RATIONALE

The ratings on six P&I Classes (A-3, A-4, A-S, B, C & D) were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges.

The ratings on three P&I Classes (E, F & G) were downgraded due to anticipated losses from troubled loans that were higher than Moody's had previously expected.

The ratings on IO Classes X-A & X-B were affirmed based on the credit quality of the referenced classes.

Moody's rating action reflects a base expected loss of 3.2% of the current balance, compared to 2.9% at Moody's last review. Moody's base expected loss plus realized losses is now 3.0% of the original pooled balance, compared to 2.2% at Moody's last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in these ratings were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in July 2017, and "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in July 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Additionally, the methodology used in rating Cl. X-A and Cl. X-B was "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

DEAL PERFORMANCE

As of the July 17, 2017 distribution date, the transaction's aggregate certificate balance has decreased by 30% to $765 million from $1.10 billion at securitization. The certificates are collateralized by 30 mortgage loans ranging in size from less than 1% to 15.6% of the pool, with the top ten loans (excluding defeasance) constituting 70% of the pool. One loan, constituting 7.9% of the pool, has an investment-grade structured credit assessment. The pool contains no defeased loans.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 15, compared to 17 at Moody's last review.

Three loans, constituting 7% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

One loan has been liquidated from the pool, resulting in an aggregate realized loss of $8.4 million (for an average loss severity of 45%). Currently, there are no loans in special servicing.

Moody's received full year 2016 operating results for 100% of the pool, and full or partial year 2017 operating results for 61.5%. Moody's weighted average conduit LTV is 93%, compared to 87% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 17% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.4%.

Moody's actual and stressed conduit DSCRs are 1.44X and 1.18X, respectively, compared to 1.53X and 1.25X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The loan with a structured credit assessment is the ELS Portfolio ($60.2 million -- 7.9% of the pool), is secured by seven manufactured housing communities and one recreational vehicle park located across Arizona (1), California (1), Florida (2), Massachusetts (1), Nevada (2) and Virginia (1). The Portfolio was 92% occupied as of March 2017 and remains unchanged since December 2016. Moody's structured credit assessment and stressed DSCR are aa2 (sca.pd) and 1.80X, respectively, compared to aa2 (sca.pd) and 1.78X at the last review.

The top three conduit loans represent 31% of the pool balance. The largest loan is The Shoppes at Buckland Hills Loan ($119.4 million -- 15.6% of the pool), which is secured by a 535,000 SF portion of a 1 million SF regional mall located in the Buckland Hills section of Manchester, CT approximately 10 miles northeast of Hartford. The malls non-collateral anchors include Macy's, Sears, JC Penney and Dick's Sporting Goods. As of March 2017, the entire mall and the inline space were 95% and 81% leased, respectively, compared to 96% and 80% in June 2016. The loan is scheduled to mature in March 2022. Moody's LTV and stressed DSCR are 132.5% and 0.84X, respectively, compared to 104.9% and 0.95X at the last review.

The second largest loan is the Capital City Mall Loan ($60.5 million -- 7.9% of the pool). The loan is secured by a 488,000 SF portion of a 609,000 SF regional mall located in Camp Hill, Pennsylvania, a suburb of Harrisburg. The mall is anchored by Macy's, JC Penney and Field & Stream. Macy's is not part of the loan collateral. Sears closed in early 2017 and will open as a 15,000 SF Sears Appliance & Mattress. Mall in-line space was 97% leased as of May 2017 compared to 92% in June 2016. Moody's LTV and stressed DSCR are 97% and 1.08X, respectively, compared to 93% and 1.07X at the last review.

The third largest loan is the GPB Portfolio 1 Loan ($57.2 million -- 7.5% of the pool). The loan is secured by 11 cross-collateralized and cross-defaulted, single and multi-tenant retail properties, located in Massachusetts (10) and New Jersey (1). As of December 2016, the portfolio was 98% leased to tenants such as Trader's Joes, Whole Foods, Aldi, Walgreens and CVS. Moody's LTV and stressed DSCR are 75% and, 1.23X, respectively, compared to 77% and 1.19X at the last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Tulay Sangiray
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Keith Banhazl
Associate Managing Director
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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