Approximately $750.0 Million of Structured Securities Affected
New York, November 10, 2017 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on seven classes and downgraded the ratings on three
classes in COMM 2012-LC4 Mortgage Trust
Cl. A-3, Affirmed Aaa (sf); previously on Dec
21, 2016 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Dec
21, 2016 Affirmed Aaa (sf)
Cl. A-M, Affirmed Aaa (sf); previously on Dec
21, 2016 Affirmed Aaa (sf)
Cl. B, Affirmed Aa2 (sf); previously on Dec 21,
2016 Affirmed Aa2 (sf)
Cl. C, Affirmed A2 (sf); previously on Dec 21,
2016 Affirmed A2 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Dec 21,
2016 Affirmed Baa3 (sf)
Cl. E, Downgraded to Ba3 (sf); previously on Dec 21,
2016 Affirmed Ba2 (sf)
Cl. F, Downgraded to B3 (sf); previously on Dec 21,
2016 Affirmed B2 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Dec
21, 2016 Affirmed Aaa (sf)
Cl. X-B, Downgraded to B1 (sf); previously on
Dec 21, 2016 Affirmed Ba3 (sf)
RATINGS RATIONALE
The ratings of two P&I classes were downgraded due to higher anticipated
losses on specially serviced and troubled loans.
The ratings of six P&I classes 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 rating of the IO class X-A was affirmed because of the credit
quality of the referenced classes.
The rating of the IO class X-B was downgraded because of the credit
quality of the referenced classes.
Moody's rating action reflects a base expected loss of 3.7%
of the current pooled balance, compared to 1.6% at
Moody's last review. Moody's base expected loss plus realized
losses is now 3.1% of the original pooled balance,
compared to 1.4% at the 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 13 October, 2017 distribution date, the transaction's
aggregate pooled certificate balance has decreased by 17% to $781.8
million from $941.3 million at securitization. The
certificates are collateralized by 35 mortgage loans ranging in size from
less than 1% to 12% of the pool, with the top ten
loans (excluding defeasance) constituting 66% of the pool.
Two loans, constituting 11% of the pool, have investment-grade
structured credit assessments.
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 19,
the same as at Moody's last review.
Seven loans, constituting 13% of the pooled balance,
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, constituting 0.8% of the pool, is
currently in special servicing. The largest specially serviced
loan is the Wood Forest Apartments ($6.0 million --
0.8% of the pool), which is secured by a 152-unit,
Class-B, student housing community located in Nacogdoches,
Texas in close proximity to Stephen F Austin University. The site
is improved with 19 two-story garden-style apartment buildings
and a leasing office/clubhouse. The property was transferred to
the special servicer in July 2017 due to payment default. The property
was 88% leased as of December 2016.
Moody's estimates an aggregate $4.3 million loss for the
specially serviced loans (72% expected loss on average).
Moody's has also assumed a high default probability for one poorly
performing loan, constituting 3.3% of the pool,
and has estimated an aggregate loss of $7.6 million (a 30%
expected loss based on a 75% probability default) from this troubled
loan.
Moody's received full year 2016 operating results for 100% of the
pool, and full or partial year 2017 operating results for 86%
of the pool (excluding specially serviced and defeased loans).
Moody's weighted average conduit LTV is 83%, compared
to 82% 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
9.7%.
Moody's actual and stressed conduit DSCRs are 1.58X and 1.32X,
respectively, compared to 1.58X and 1.31X 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 Union Square Retail
Loan ($75.0 million -- 9.6% of the pool),
which is secured by the leasehold interest in a 236,000 SF,
Class A, mixed-use property located in Union Square in Manhattan,
New York. The property is anchord by a 14-screen United
Artists Theatre, Best Buy, and Nordstrom Rack. The
property was 94% leased as of June 2017. Moody's structured
credit assessment and stressed DSCR are aa1 (sca.pd) and 2.10X,
respectively.
The loan with a structured credit assessment is the Johnstown Galleria
-- Ground Lease Loan ($13.6 million -- 1.7%
of the pool), which is secured by the fee interest in a 46 acre
site in Johnstown, Pennsylvania, which is improved with a
712,000 SF two-story regional mall anchored by a Sears,
JCPenney, Bon-Ton, and Boscov's. The trust's
collateral consists of a 99-year ground lease encumbering a 355,000
SF component of the Johnstown Galleria, with a final maturity date
of June 2108. Moody's structured credit assessment and stressed
DSCR are aaa (sca.pd) and 1.26X, respectively.
The top three conduit loans represent 25% of the pool balance.
The largest loan is the Square One Mall Loan ($91.6 million
-- 11.7% of the pool), which is secured by the
fee interests in a 541,000 SF component of a 929,000 SF super-regional
mall located in Saugus, Massacusetts, approximately 10 miles
northeast of Boston. The property is anchord by a Sears,
Macy's, Dick's Sporting Goods, Best Buy,
BD's Furniture, and TJMaxx. Macy's and Sears
own their own boxes. The property was 94% leased as of June
2017. Moody's LTV and stressed DSCR are 76% and 1.36X,
respectively, compared to 68% and 1.47X at the last
review.
The second largest loan is the Hartman Portfolio Loan ($47.0
million -- 6.0% of the pool), which was originally
secured by 12 properties totaling 1.6 million SF of varying use
located in Houston (65% of NRA), Dallas (24%),
and San Antonio (11%), Texas. The portfolio was initially
composed of nine Class B office properties (80% of NRA),
two retail properties (16% of NRA), and one industrial property
(5% of NRA). The portfolio was 73% leased as of June
2017. The asset is also encumbered by a $8.3 million
non-pooled B-note, which is held within the trust
and is collateral for the Class HP (a non-pooled "Rake"
bond) that is not rated by Moody's. Moody's LTV and stressed
DSCR are 88% and 1.19X, respectively, compared
to 74% and 1.43X at the last review.
The third largest loan is the Puerto Rico Retail Portfolio Loan ($53.4
million -- 6.8% of the pool), which is secured
by the fee interest in a 554,500 SF anchored-retail portfolio
spanning four properties located in Puerto Rico. The collateral
consists of Plaza Los Prados, in Caguas (163,500 SF;
29% of NRA), Juncos Plaza, in Juncos (208,000
SF; 37.5%), Manati Centro Plaza, in Manati
(118,000 SF; 21.3%), and University Plaza,
in Mayaguez (65,000 SF; 11.7%). The portfolio
was 96% leased as of December 2016. The property was impacted
by Hurricane Maria. However, as of the most-recent
remittance report, the loan remains current. Moody's LTV
and stressed DSCR are 87% and 1.21X, respectively,
compared to 84% and 1.26X 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.
Aaron Dresher
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
MD - Structured Finance
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
