Approximately $835.9 million of structured securities affected
New York, November 05, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on five classes and downgraded the ratings on three
classes in COMM 2013-CCRE12 Mortgage Trust, Commercial Pass-Through
Certificates as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Jul
29, 2019 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jul
29, 2019 Affirmed Aaa (sf)
Cl. A-M, Affirmed Aaa (sf); previously on Jul
29, 2019 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jul
29, 2019 Affirmed Aaa (sf)
Cl. B, Downgraded to A2 (sf); previously on Jul 29,
2019 Affirmed Aa3 (sf)
Cl. C, Downgraded to Ba1 (sf); previously on Jul 29,
2019 Downgraded to Baa1 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on
Jul 29, 2019 Affirmed Aaa (sf)
Cl. PEZ**, Downgraded to Baa1 (sf); previously
on Jul 29, 2019 Affirmed A1 (sf)
* Reflects interest-only classes
** Reflects exchangeable classes
RATINGS RATIONALE
The ratings on four of the 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 ratings on two of the P&I classes, Cl. B and Cl.
C, were downgraded due to a decline in pool performance and higher
anticipated losses from specially serviced and troubled loans.
Four loans representing 8.6% of the pool are in special
servicing. Two of the specially serviced loans (5.1%)
are already REO and the remainder are 90+ days delinquent or in foreclosure.
Furthermore, the fourth largest loan, Oglethorpe Mall (5.9%
of the pool) had already suffered declines in performance through year-end
2019.
The rating on the IO class was affirmed based on the credit quality of
its referenced classes.
The rating on class PEZ was downgraded due to a decline in the credit
quality of its referenced exchangeable classes.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high. Stress on commercial real estate
properties will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and declines
in foot traffic and sales for non-essential items at retail properties.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Moody's rating action reflects a base expected loss of 11.2%
of the current pooled balance, compared to 9.8% at
Moody's last review. Moody's base expected loss plus realized
losses is now 10.2% of the original pooled balance,
compared to 8.5% 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 rating all classes except exchangeable classes
and interest-only classes were "Approach to Rating US and Canadian
Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778
and "Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579.
The principal methodology used in rating exchangeable classes was "Moody's
Approach to Rating Repackaged Securities" published in June 2020 and available
at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1230078.
The methodologies used in rating interest-only classes were "Approach
to Rating US and Canadian Conduit/Fusion CMBS" published in September
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778,
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579,
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179.
Please see the list of ratings at the top of this announcement to identify
which classes are interest-only (indicated by the *) and exchangeable
classes (indicated by the **). Alternatively, please
see the Rating Methodologies page on www.moodys.com for
a copy of these methodologies.
DEAL PERFORMANCE
As of the October 13, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 18% to $977.5
million from $1.2 billion at securitization. The
certificates are collateralized by 52 mortgage loans ranging in size from
less than 1% to 14% of the pool, with the top ten
loans (excluding defeasance) constituting 64% of the pool.
Ten loans, constituting 9.5% of the pool, have
defeased and are secured by US government securities.
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 13,
compared to a Herf of 16 at last review.
As of the October 2020 remittance report, loans representing 89%
were current or within their grace period on their debt service payments,
2% were beyond their grace period but less than 30 days delinquent,
and 9% were 90+ days delinquent, in foreclosure or already
REO.
Thirteen loans, constituting 41% 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.
Four loans have been liquidated from the pool, resulting in an aggregate
realized loss of $12.5 million (for an average loss severity
of 49%). Four loans, constituting 8.6%
of the pool, are currently in special servicing, all of which
transferred to special servicing prior to 2020.
The largest specially serviced loan is the Harbourside North ($36.6
million -- 3.7% of the pool), which is secured
by the leasehold interest in a Class A office building in the Georgetown
submarket of Washington D.C. The property operates subject
to ground lease payments. Ground lease payments have historically
represented a high share of property's revenue. The loan transferred
to the special servicer in July 2018 due to delinquent payments and became
REO in March 2019. Property performance had declined in 2018 due
to reduced occupancy and rental revenues. The property's
revenues continued to decline in 2019, although reduced expenses
led to a slight increase in property performance. However,
the property's performance remained below expectations at securitization.
As of September 2020, occupancy at the property improved to approximately
83%, unchanged from year-end 2019 and up from 67%
in 2018. The loan has incurred approximately $3.6
million of advances and the master servicer has recognized an appraisal
reduction of $3.9 million.
The second largest specially serviced loan is the Monarch 544 at Coastal
Carolina Loan ($21.5 million -- 2.2%
of the pool), which is secured by a 440 bed (128-unit) student
housing property built in 2012 and located in Conway, South Carolina.
The loan transferred to special servicing in June 2019 for delinquent
payments due to both declining occupancy and revenue. As a result
of the reduced revenue and increased expenses, the property's
NOI declined significantly as of year-end 2019. A receiver
was appointed and took control of the asset in December 2019. In
September 2020, a foreclosure sale occurred and is currently awaiting
expiration of the 30-day upset period. The loan has incurred
approximately $2.5 million of advances and the master servicer
has recognized an appraisal reduction of $12.7 million.
Moody's anticipates a significant loss on this loan.
The third largest specially serviced loan is the Hilton Garden Inn -
Morgantown Loan ($13.4 million -- 1.4%
of the pool), which is secured by five story, 118 room,
full-service hotel in Morgantown, WV. The property
is subject to a franchise agreement with Hilton through May 2030.
The loan transferred to special servicing in April 2017 due to failure
to comply with terms of the franchise agreement. The loan became
REO in June 2018. In 2019 the property went through approximately
$0.5 million in renovations and was listed for sale later
that year. The loan has incurred approximately $5 million
in advances and based on a recent appraisal value has recognized an appraisal
reduction of $12.6 million. Moody's anticipates
a significant loss on this loan.
The remaining specially serviced loan is secured by a retail property
located in Elkview, WV that has been in special servicing since
2016 and contains a dark Kmart space (40% of the NRA).
Moody's has also assumed a high default probability for three poorly
performing loans, constituting 7% of the pool. Moody's
has estimated an aggregate loss of $70.3 million (an 47%
expected loss on average) from these troubled and specially serviced loans.
The largest troubled loan is the Oglethorpe Mall Loan ($57.6
million -- 5.9% of the pool), which
represents the fourth largest loan in the pool and is secured by a regional
mall located in Savannah, Georgia. At securitization the
mall included four anchor tenants, Macy's, JC Penney,
Belk and Sears. Both the Belk and Sears space were non-collateral.
However, in 2018 Sears vacated and the anchor space remains vacant.
The property's historical performance generally improved through
2016, however, the property's NOI has since declined
annually due to both lower rental revenue and higher expenses.
The December 2019 NOI was 12% below 2017 and declined to below
the property's underwritten NOI. The annualized June 2020
NOI declined an additional 10% from year-end 2019.
Furthermore, Stein Mart (37,119 SF; November 2020),
announced plans to close a significant portion of its brick and mortar
stores. The property represents the dominant mall in the greater
area of Savannah however, it faces competition from the Savannah
Outlet Mall, approximately 15 miles southeast of the subject.
As of March 2020, in-line occupancy at the property was 90%
and the total mall occupancy was 81% when excluding the vacant
Sears. In-line sales (<10,00 SF) as of June 2020
were $311 PSF compared to $368 PSF in 2019 and $433
PSF at securitization. The loan has now amortized 4% since
securitization after an initial 5-year interest only period.
Due to the property's decline in performance, Moody's
has identified this as a troubled loan.
As of the October 2020 remittance statement cumulative interest shortfalls
were $6.5 million and impacted up to Cl. E.
Moody's anticipates interest shortfalls will continue because of the exposure
to specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal entitlement reductions (ASERs), loan modifications and
extraordinary trust expenses.
Moody's received full year 2019 operating results for 100% of the
pool, and partial year 2020 operating results for 75% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 101%, compared to 100%
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 14.2%
(excluding the 175 West Jackson Loan) to the most recently available net
operating income (NOI). Moody's value reflects a weighted
average capitalization rate of 9.2%.
Moody's actual and stressed conduit DSCRs are 1.35X and 1.06X,
respectively, compared to 1.39X and 1.06X 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 top three conduit loans represent 35% of the pool balance.
The largest loan is the 175 West Jackson Loan ($141.2 million
-- 14.5% of the pool), which represents a pari-passu
portion of a $263.7 million mortgage loan. The loan
is secured by a Class A, 22-story office building totaling
1.45 million SF and located within the CBD of Chicago, Illinois.
In March 2018 the loan had transferred to special servicing for imminent
monetary default after the property experienced year-over-year
declining occupancy since securitization. The loan was subsequently
assumed by Brookfield Property Group as the new sponsor, in connection
with the purchase of the property for $305 million. In August
2018 the loan returned to the master servicer and despite a low DSCR has
remained current on its debt service payments through the October 2020
remittance date. The property benefits from its central location
within the West Loop area of Chicago's central business district.
As of December 2019, the property was 67% occupied compared
to 61% in 2018. The loan has amortized nearly 6%
since securitization and Moody's LTV and stressed DSCR are 121%
and 0.80X, respectively, compared to 112% and
0.87X at the last review.
The second largest loan is the Miracle Mile Shops Loan ($141.4
million -- 14.5% of the pool), which represents
a pari-passu portion of a $565 million mortgage loan.
The loan is secured by a 450,000 SF regional mall located on the
Las Vegas Strip in Las Vegas, Nevada. The collateral property
is located at the base of the Planet Hollywood Hotel and draws from non-traditional
anchors, three performing arts theaters and the Las Vegas Strip
itself. The collateral was 97% leased as of June 2020,
compared to 98% leased as of December 2019. The March 2020
running twelve-month comparable in-line sales (tenants with
less than 10,000 SF) were $796 PSF, compared to $850
in the prior running twelve-month period. The loan has amortized
2.5% and Moody's LTV and stressed DSCR are 93% and
0.90X, respectively.
The third largest loan is the Westlakes Loan ($63.9 million
-- 6.5% of the pool), which is secured four Class
A suburban office buildings within a five-building office complex
located in Berwyn, Pennsylvania. As of June 2020, the
property was 93% leased compared to 89% in December 2019
and 82% in December 2018. The year-end 2019 NOI was
in-line with expectation at securitization and property performance
improved through June 2020 as a result of the increased occupancy.
The loan has amortized 6% after an initial 3-year interest
only period. Moody's LTV and stressed DSCR are 122% and
0.89X, respectively.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
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, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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.
Yoni Lobell
Associate Lead 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
Matthew Halpern
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
