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Rating Action:

Moody's Upgrades Seven, Downgrades Two and Affirms Ten CMBS Classes of COMM 2006-FL12

24 Jul 2013

Approximately $663.6 Million of Structured Securities Affected

New York, July 24, 2013 -- Moody's Investors Service (Moody's) upgraded the ratings of five pooled P&I classes and two pooled interest-only notional classes, downgraded two pooled interest-only notional classes and affirmed two pooled P&I classes, one interest-only notional class and seven non-pooled, or rake, classes of COMM 2006-FL12 Commercial Pass-Through Certificates as follows:

Cl. A-J, Upgraded to Aaa (sf); previously on Mar 17, 2011 Downgraded to A1 (sf)

Cl. B, Upgraded to Aa3 (sf); previously on Mar 17, 2011 Downgraded to A3 (sf)

Cl. C, Upgraded to A2 (sf); previously on Mar 17, 2011 Downgraded to Baa2 (sf)

Cl. D, Upgraded to Baa1 (sf); previously on Mar 17, 2011 Downgraded to Ba1 (sf)

Cl. E, Upgraded to Baa3 (sf); previously on Mar 17, 2011 Downgraded to Ba2 (sf)

Cl. F, Affirmed B1 (sf); previously on Mar 17, 2011 Downgraded to B1 (sf)

Cl. G, Affirmed B3 (sf); previously on Mar 17, 2011 Downgraded to B3 (sf)

Cl. ES1, Affirmed Caa1 (sf); previously on Oct 25, 2012 Downgraded to Caa1 (sf)

Cl. ES2, Affirmed Caa2 (sf); previously on Oct 25, 2012 Downgraded to Caa2 (sf)

Cl. ES3, Affirmed Caa3 (sf); previously on Oct 25, 2012 Downgraded to Caa3 (sf)

Cl. KR1, Affirmed B3 (sf); previously on Mar 17, 2011 Downgraded to B3 (sf)

Cl. KR3, Affirmed Caa3 (sf); previously on Mar 17, 2011 Downgraded to Caa3 (sf)

Cl. TC1, Affirmed Ba2 (sf); previously on Dec 9, 2011 Upgraded to Ba2 (sf)

Cl. TC2, Affirmed Ba3 (sf); previously on Dec 9, 2011 Upgraded to Ba3 (sf)

Cl. X-2, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf)

Cl. X-3-DB, Downgraded to Ba3 (sf); previously on Oct 25, 2012 Upgraded to Ba2 (sf)

Cl. X-5-DB, Downgraded to Ba3 (sf); previously on Oct 25, 2012 Upgraded to Ba2 (sf)

Cl. X-3-SG, Upgraded to B2 (sf); previously on Oct 25, 2012 Downgraded to B3 (sf)

Cl. X-5-SG, Upgraded to B2 (sf); previously on Oct 25, 2012 Downgraded to B3 (sf)

RATINGS RATIONALE

The upgrades of pooled P&I Classes AJ through E are due to increased credit support from the payoff of six loans since last review and the partial pay down of the remaining three loans in the pool. The upgrades of interest-only Class X-3-SG and Class X-5-SG are based on the credit assessments of the two remaining reference loans, the Avenue at Tower City loan and the Embassy Suites Lake Buena Vista loan. The downgrades of interest--only Class X-3-DB and Class X-5-DB are based on the credit assessment of the one remaining reference loan, the Kerzner International Portfolio loan. The affirmations of two pooled P&I classes and seven rake classes are due to key parameters, including Moody's loan to value (LTV) ratio and Moody's stressed debt service coverage ratio (DSCR), remaining within acceptable ranges. The rating of the interest only Class X-2 is consistent with the expected credit performance of its referenced pooled classes and thus is affirmed.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.

Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated.

Moody's central global macroeconomic scenario calls for US GPD growth for 2013 that is likely to remain close to 2% as the greater impetus from the US private sector is likely to broadly offset the drag on activity from more restrictive fiscal policy. Thereafter, we expect the US economy to expand at a somewhat faster pace than is likely this year, closer to its long-run average pace of growth. Risks to our forecasts remain skewed to the downside despite recent positive developments. Moody's believes that the three most immediate risks are: i) the risk of a deeper than currently expected recession in the euro area accompanied by deeper credit contraction, potentially triggered by a further intensification of the sovereign debt crisis; ii) slower-than-expected recovery in major emerging markets following the recent slowdown; and iii) an escalation of geopolitical tensions, resulting in adverse economic developments.

The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's review incorporated the use of the excel-based Large Loan Model v 8.5. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations.

Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output.

The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through a review utilizing MOST® (Moody's Surveillance Trends) Reports and Remittance Statements. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated October 25, 2012. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

DEAL PERFORMANCE

As of the July 13, 2013 Payment Date the transaction's certificate balance has decreased approximately 78% to $663.6 million from $3.0 billion at securitization due to the full pay off of eight loans, the liquidation of five loans and the discounted pay off of one loan. Additionally, the pool has decreased due to the payment of release premiums and/or loan pay downs from the remaining three loans. The certificates are currently collateralized by three floating-rate loans ranging in size from 3% to 93% of the pooled balance.

The pool has experienced $15.8 million in losses due to the liquidation of the Legacy Bayside loan and the Superstition Springs loan and the special servicer workout fee related to the Hotel del Coronado loan.

The largest loan is the Kerzner International Portfolio loan ($477.6 million -- 93% of the pooled balance), a 50% portion of a pari passu split loan structure that is securitized in CSFB 2006-TFL2. There is also $143.8 million of non-pooled, or rake, trust debt (Classes KR1, KR2 and KR3) and an approximately $1.0 billion non-trust junior secured loan component. The loan is secured by substantially all of the borrower's real estate assets located on Paradise Island, Bahamas, including the Atlantis Hotel and the One & Only Ocean Club Hotel and golf course (106 keys, located one mile from the Atlantis), a marina and vacant and improved land. The resort features the largest casino and ballroom in the Caribbean and water-themed attractions, including the world's largest open-air marine habitat. The loan is also supported by a pledge of management agreements and fees relating to the properties, Harborside timeshare units, and the Residences at Atlantis and Ocean Club condos. Revenue per available room (RevPAR), calculated by multiplying the average daily rate by the occupancy rate, for the trailing 12-month period ending March 2013 was $210 at the Atlantis, unchanged from the trailing 12-month period ending June 2012, and $818 at the One& Only Ocean Club, compared to $812 for the trailing 12-month period ending June 2012.

The trust debt has decreased 14% since securitization to $621.5 million from $715.0 million and total debt has decreased to $2.3 billion from $2.8 billion at securitization. The loan was transferred to special servicing in January 2012 due to the loan not being paid in full by the extended maturity date of November 21, 2011. On November 1, 2011 the loan was paid down by $100 million from funds in the Excess Cash Reserve Fund in consideration of a short term extension. A cash trap is in place whereby excess cash flow after debt service is held by the servicer and applied to replenish reserves after which excess funds are applied to pay down the loan balance.

In April 2012 Brookfield Asset Management assumed the mortgage debt and took over 100% of the equity in the properties in exchange for the elimination of its $175.4 million B-4-B Participation and a $10 million principal repayment of the senior participation. Kerzner continues to manage the properties for a fee. The term of the loan has been extended to September 2014.

A concern is additional competition from the $3.4 billion Baha Mar resort complex that broke ground in March 2011 on Nassau's Cable Beach. Baha Mar is a single-phase project backed by the Chinese government that is scheduled to open in late 2014. The resort will feature four hotels with a total of approximately 2,250 rooms, a golf course, convention center, a casino that is to be the largest in the Caribbean and a 10-acre Eco Water Park. In overall size and amenities it is expected to be very similar to the Atlantis. The project is expected to be future competition for the Atlantis and complicate the re-financing of the current debt. Moody's credit assessment for the pooled debt is Ba3, the same as last review.

The Embassy Suites Lake Buena Vista loan ($20.5 million -- 4%) is secured by a 334-key full-service hotel located in Orlando, Florida. The loan was transferred to special servicing in October 2011 due to impending maturity default. The loan matured in November 2011. A forbearance agreement has been in place since then and expires in November 2013. A cash flow sweep is being applied to the A-Note balance and the property is currently listed for sale. Additional debt includes a non-pooled trust component totaling $4.7 million, Classes ES-1, ES-2 and ES-3, and non-trust subordinate debt in the amount of $15.0 million. Moody's credit assessment is Caa1, the same as last review.

The Avenue at Tower City loan ($14.9 million -- 3%) is secured by a retail property located in downtown Cleveland, Ohio containing approximately 364,794 square feet. The property was 64% leased as of April 2013. Moody's credit assessment is Baa3, the same as last review.

REGULATORY DISCLOSURES

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

In conducting surveillance of this credit, Moody's considered performance data contained in servicer and remittance reports. Moody's obtains servicer reports on this transaction on a periodic basis, at least annually.

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Jay Rosen
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Michael Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's Upgrades Seven, Downgrades Two and Affirms Ten CMBS Classes of COMM 2006-FL12
No Related Data.
© 2019 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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