Approximately $632.9 million of Structured Securities Affected
New York, July 30, 2018 -- Moody's Investors Service has assigned provisional ratings to eight classes
of CMBS securities, issued by UBS Commercial Mortgage Trust 2018-C12,
Commercial Mortgage Pass-Through Certificates, Series 2018-C12:
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-SB, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-S, Assigned (P)Aa2 (sf)
Cl. X-A*, Assigned (P)Aaa (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The Certificates are collateralized by 65 fixed rate loans secured by
75 properties. The ratings are based on the collateral and assigned
Structured Credit Assessment to three loans (10.4% of the
pool balance) that are assigned investment grade SCA's. Wyvernwood
Apartment, which represents approximately 6.2% of
the pool balance is assigned an investment grade SCA of baa2 (sca.pd).
The loan is secured by the borrower's fee simple interest in a 1,175-unit
garden style multifamily community located in Los Angeles, CA.The
20 Times Square loan, which represents approximately 3.1%
of the pool balance is assigned an investment grade SCA of aaa (sca.pd).
The loan is secured by the borrower's fee simple interest in a 16,066
SF parcel of land located along Seventh Avenue and West 47th Street in
Times Square, New York, NY. The 5th Street Station
loan, which represents 1.1% of the pool balance is
assigned an investment grade SCA of a3 (sca.pd). The loan
is secured by the borrower's fee simple interest in a grocery-anchored
retail center located in Charlottesville, VA.
Moody's approach to rating CMBS deals combines both commercial real estate
and structured finance analysis. Based on commercial real estate
analysis, Moody's determines the credit quality of each mortgage
loan and calculates an expected loss on a loan specific basis.
Under structured finance, the credit enhancement for each certificate
typically depends on the expected frequency, severity, and
timing of future losses. Moody's also considers a range of qualitative
issues as well as the transaction's structural and legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the severity
of loss upon a default, which is largely driven by each loan's LTV
ratio.
The Moody's Actual DSCR of 1.66x (1.47x excluding credit
assessed loan(s)) is worse than the 2017 conduit/fusion transaction average
of 1.84x, but in-line with other conduit/fusion transactions
rated by Moody's in the second quarter of 2018. The Moody's
Stressed DSCR of 0.99x (0.96x excluding credit assessed
loan(s)) is worse than the 2017 conduit/fusion transaction average of
1.0x.
The pooled trust loan balance of $804.9 million represents
a Moody's LTV ratio of 112.2% (117.7% excluding
credit assessed loan),which is in-line with the 2017conduit/fusion
transaction average of 112.4% and better than most pools
securitized during the second quarter of 2018. There are five loans
in the pool structured with additional debt in the form of subordinate
debt and mezzanine debt. With the additional debt, the Moody's
total debt LTV ratio rises to 127.7% (120.5%
excluding credit assessed loans).
Moody's also considers both loan level diversity and property level diversity
when selecting a ratings approach. With respect to loan level diversity,
the pool's loan level Herfindahl score is 38.3. The transaction
loan level diversity profile is better than Moody's-rated
transactions during the prior four quarters, which averaged 26.8.
With respect to property level diversity, the pool's property level
Herfindahl score is 41.1.
The following notable strengths of the transaction include:
(i) The pool includes three loans (10.4% of the pool balance)
that are assigned investment grade SCA's.
(ii) The pool's loan Herfindahl score of 38.3 (37.9 excluding
SCA loans) is above the trailing four quarter 2018 conduit average of
26.8.
The following notable concerns of the transaction include:
(i) The pool has a high weighted average Moody's LTV ("MLTV")
ratio of 112.2% (117.7% excluding SCA's),
which is in-line with the trailing four quarter 2018 conduit average
of 112.3%
(ii) The pool contains 20 hotel properties that collectively account for
approximately 19.4% of the pool balance
Moody's also grades properties on a scale of 0 to 5 (best to worst) and
considers those grades when assessing the likelihood of debt payment.
The factors considered include property age, quality of construction,
location, market, and tenancy. The pool's weighted
average property quality grade is 2.46, which is worse than
the average score of 2.31 calculated across Moody's-rated
multi-borrower transactions during the prior four quarters.
The principal methodology used in rating UBS Commercial Mortgage Trust
2018-C12, Cl. A-1, Cl. A-2,
Cl. A-SB, Cl. A-3, Cl.
A-4, Cl. A-5, and Cl. A-S
was "Approach to Rating US and Canadian Conduit/ Fusion CMBS" published
in July 2017. The methodologies used in rating UBS Commercial Mortgage
Trust 2018-C12, Cl. X-A were "Approach to Rating
US and Canadian Conduit/ Fusion CMBS" published in July 2017 and "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 these methodologies.
Moody's analysis of credit enhancement levels for conduit deals is driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate Moody's
uses to estimate Moody's value). Moody's fuses the conduit results
with the results of its analysis of investment-grade structured
credit assessed loans and any conduit loan that represents 10%
or greater of the current pool balance.
Moody's analysis considers the following inputs to calculate the
proposed IO rating based on the published methodology: original
and current bond ratings and credit estimates; original and current
bond balances grossed up for losses for all bonds the IO(s) reference(s)
within the transaction; and IO type corresponding to an IO type as
defined in the published methodology.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at the
date it was prepared and such information has not been independently verified
by Moody's and (b) must be construed solely as a statement of opinion
and not a statement of fact or an offer, invitation, inducement
or recommendation to purchase, sell or hold any securities or otherwise
act in relation to the issuer or any other entity or in connection with
any other matter. Moody's does not guarantee or make any representation
or warranty as to the correctness of any information, rating or
communication relating to the issuer. Moody's shall not be liable
in contract, tort, statutory duty or otherwise to the issuer
or any other third party for any loss, injury or cost caused to
the issuer or any other third party, in whole or in part,
including by any negligence (but excluding fraud, dishonesty and/or
willful misconduct or any other type of liability that by law cannot be
excluded) on the part of, or any contingency beyond the control
of Moody's, or any of its employees or agents, including any
losses arising from or in connection with the procurement, compilation,
analysis, interpretation, communication, dissemination,
or delivery of any information or rating relating to the issuer.
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 may indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously anticipated.
Factors that may cause an upgrade of the ratings include significant loan
paydowns or amortization, an increase in the pool's share of defeasance
or overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall performance
of the pool, loan concentration, increased expected losses
from specially serviced and troubled loans or interest shortfalls.
Moody's ratings address only the credit risks associated with the
transaction. Other non-credit risks have not been addressed
and may have a significant effect on yield to investors.
The ratings do not represent any assessment of (i) the likelihood or frequency
of prepayment on the mortgage loans, (ii) the allocation of net
aggregate prepayment interest shortfalls, (iii) whether or to what
extent prepayment premiums might be received, or (iv) in the case
of any class of interest-only certificates, the likelihood
that the holders thereof might not fully recover their investment in the
event of a rapid rate of prepayment of the mortgage loans.
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.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1134967.
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 quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
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.
Harshad Mehta
Asst Vice President - 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
Blair Coulson
VP-Senior Credit Officer
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
