Approximately $931 million of structured securities affected
New York, June 29, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on four classes, placed three classes on review
for downgrade and downgraded the ratings on five classes that remain on
review for downgrade in COMM 2012-CCRE3 Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 2012-CCRE3
as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Jul
19, 2018 Affirmed Aaa (sf)
Cl. A-M, Affirmed Aaa (sf); previously on Jul
19, 2018 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jul
19, 2018 Affirmed Aaa (sf)
Cl. B, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Jul 19, 2018 Affirmed Aa3 (sf)
Cl. C, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Jul 19, 2018 Affirmed A3 (sf)
Cl. D, Downgraded to Baa3 (sf) and Remains On Review for
Possible Downgrade; previously on Apr 17, 2020 Baa1 (sf) Placed
Under Review for Possible Downgrade
Cl. E, Downgraded to B1 (sf) and Remains On Review for Possible
Downgrade; previously on Apr 17, 2020 Baa3 (sf) Placed Under
Review for Possible Downgrade
Cl. F, Downgraded to B3 (sf) and Remains On Review for Possible
Downgrade; previously on Apr 17, 2020 Ba2 (sf) Placed Under
Review for Possible Downgrade
Cl. G, Downgraded to Caa3 (sf) and Remains On Review for
Possible Downgrade; previously on Apr 17, 2020 B2 (sf) Placed
Under Review for Possible Downgrade
Cl. X-A*, Affirmed Aaa (sf); previously on
Jul 19, 2018 Affirmed Aaa (sf)
Cl. X-B*, Downgraded to Caa1 (sf) and Remains
On Review for Possible Downgrade; previously on Apr 17, 2020
Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. PEZ**, Aa3 (sf) Placed Under Review for Possible
Downgrade; previously on Jul 19, 2018 Affirmed Aa3 (sf)
* Reflects interest-only classes
** Reflects exchangeable classes
RATINGS RATIONALE
The ratings on three 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 four P&I classes were downgraded due to higher anticipated
losses driven primarily by the decline in performance and significant
exposure to three regional malls, Solano Mall (11% of the
pool), Crossgate Mall (10% of the pool) and Emerald Square
Mall (7% of the pool). Furthermore, the three regional
mall loans, representing 27% of the pool, are scheduled
to mature within the next two years and may face significant refinance
risk due to the current retail environment.
The ratings on Cl. B and Cl C. was placed on review for
possible downgrade, and the ratings on four P&I classes,
Class D, Class E, Class F and Class G, remain on review
for possible downgrade due to the significant exposure and uncertainty
around the future performance of the two regional malls loans recently
transferred to special servicing as a result of the coronavirus pandemic,
Solano Mall and Crossgates Mall, both of which are more than 60
days delinquent on their debt service payments.
The rating on one IO class, Cl. X-B, was downgraded
and remains on review for possible downgrade due to a decline in the credit
quality of the referenced exchangeable classes and those referenced P&I
classes were placed on review for possible downgrade.
The ratings on IO Class X-A was affirmed based on the credit quality
of the referenced classes.
The rating on the exchangeable class, Class PEZ, was placed
on review for possible downgrade due to its referenced P&I classes
being placed on review for possible downgrade.
Our analysis has considered the effect of the coronavirus outbreak on
the US economy as well as the effects that the announced government measures,
put in place to contain the virus, will have on the performance
of commercial real estate. 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.
The contraction in economic activity in the second quarter will be severe
and the overall recovery in the second half of the year will be gradual.
However, there are significant downside risks to our forecasts in
the event that the pandemic is not contained and lockdowns have to be
reinstated. As a result, the degree of uncertainty around
our forecasts is unusually high. 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 9.6%
of the current pooled balance, compared to 2.5% at
Moody's last review. Moody's base expected loss plus realized
losses is now 7.5% of the original pooled balance,
compared to 2.0% 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 May 2020 and available at https://www.moodys.com/research/Approach-to-Rating-US-and-Canadian-ConduitFusion-CMBS--PBS_1226187
and "Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875.
The principal methodology used in rating the exchangeable classes was
"Moody's Approach to Rating Repackaged Securities" methodology
published in June 2020 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Repackaged-Securities--PBS_1230078.
The methodologies used in rating interest-only classes were "Approach
to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and
available at https://www.moodys.com/research/Approach-to-Rating-US-and-Canadian-ConduitFusion-CMBS--PBS_1226187,
"Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875,
and "Moody's Approach to Rating Structured Finance Interest-Only
(IO) Securities" published in February 2019 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Structured-Finance-Interest-Only-IO-Securities--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 June 17, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 22% to $973
million from $1.25 billion at securitization. The
certificates are collateralized by 40 mortgage loans ranging in size from
less than 1% to 13% of the pool, with the top ten
loans (excluding defeasance) constituting 70% of the pool.
Eleven loans, constituting 15% 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 12,
compared to a Herf of 15 at Moody's last review.
As of the June 2020 remittance report, loans representing 62%
were current on their debt service payments, 7% were beyond
their grace period but less than 30 days late, 10% were between
30 -- 59 days delinquent and 21% were between 60 -- 89
days delinquent.
Eight loans, constituting 17% 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.
Five loans, constituting 21% of the pool, are currently
in special servicing. Three of the specially serviced loans,
representing 21% of the pool, have transferred to special
servicing since March 2020.
The largest specially serviced loan is the Solano Mall Loan ($105.0
million -- 10.8% of the pool), which is secured
by a 561,000 square feet (SF) portion of 1.1 million SF super
regional mall located in Fairfield, California. The mall's
non-collateral anchors include Macy's, J.C.
Penney, and Sears, however, Sears previously announced
plans to close its store in July 2020. The largest collateral tenant
is Edwards Cinemas (11.2% of NRA, lease expiration
December 2024). Property performance has continued to decline from
securitization and the property's 2019 net operating income (NOI)
was 27% lower than securitization levels due to both lower total
revenues and increased operating expenses. Furthermore, several
major collateral tenants including Forever 21 (13% of NRA),
24 Hour Fitness (5% of NRA) and Express (1% of NRA) have
announced plans to close their locations at the mall. The property
was 94% leased as of December 2019, compared to 98%
leased as of December 2017, however, the 2019 occupancy includes
the tenants with plans to vacate. The loan is interest only for
its entire term and matures in July 2022. The mall re-opened
in late May after its temporary closure, however, the loan
transferred to special servicing in June 2020 for imminent default as
a result of the coronavirus pandemic and is last paid through its March
2020 payment date.
The second largest specially serviced loan is the Crossgates Mall Loans
A-1A2 and A-1B2 ($94.2 million -- 9.7%
of the pool) which represents a pari-passu portion of a $261.7
million mortgage loan. The loan is secured by a two-story,
1.3 million square foot (SF) super regional mall located in Albany,
New York. The mall is anchored by Macy's (non-collateral),
J.C. Penney, Dick's Sporting Goods, Burlington
Coat Factory, Best Buy and Regal Crossgates 18. As of March
2020, the total mall and collateral occupancy was 96% and
the in-line occupancy was 89%, compared to 88%
in March 2019. The property performance has been stable and the
2019 net operating income was 2% higher than securitization levels.
The loan was transferred to special servicing in May 2020 as a result
of the coronavirus outbreak and is last paid through its March 2020 payment
date. New York suspension of non-essential business closures
attributed to the mall remaining closed, with certain tenants offering
curbside pick-up in the exterior of the mall. As a result
of the closure, many tenants have not remitted rent payments in
recent months. The special servicer indicated they are in discussions
with the borrower to formulate a resolution plan. The mall represents
a dominant super-regional mall with over 10 anchors and junior
anchors and benefits from its location at the junction of Interstate 87
and Interstate 90. However, due to reopening uncertainty
and delinquent debt service payments, Moody's identified this as
a troubled loan.
The remaining two specially serviced loans are secured by limited service
hotel properties in Georgia and in South Carolina that transferred to
special servicing in April 2019 and November 2019, respectively,
due to declining performance from securitization.
Moody's has also assumed a high default probability for two poorly
performing loans, constituting 11.5% of the pool.
The largest troubled loan is the Emerald Square Mall Loan, which
is secured by a 564,501 SF portion of a 1,022,923 SF
enclosed super-regional mall in North Attleboro, Massachusetts.
The mall is anchored by a Macy's, Macy's Home,
Sears and J.C. Penney, of which only J.C.
Penney is collateral for the loan. While all anchors remain at
the property, property performance has declined since securitization
due to lower rental revenues. The reported 2019 revenues were $5
million lower than in 2012, leading to a decline in NOI of 26%
for the same period. As of December 2019, the property was
80% leased, compared to 83% as of March 2018 and 90%
at securitization. The mall re-opened on June 10 after closing
temporarily during the pandemic. The loan sponsor, Simon
Property Group, recently classified this mall under their "Other
Properties." The loan has amortized nearly 14% since securitization,
however, the loan is on the master servicer watchlist due its late
payments and is last paid through its April 2020 payment date.
The other troubled loan is secured by two properties of mixed use located
in Washington, DC. The properties performance has declined
due to the recent departure of a large tenant at one of the properties
and the 2019 actual DSCR was below 1.00X.
Moody's received full year 2018 and 2019 operating results for 99%
and 96% of the pool (excluding specially serviced and defeased
loans). Moody's weighted average conduit LTV is 99%,
compared to 88% 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 23% to the most recently available net operating income (NOI).
Moody's value reflects a weighted average capitalization rate of
9.6%.
Moody's actual and stressed conduit DSCRs are 1.64X and 1.13X,
respectively, compared to 1.89X and 1.29X 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 28% of the pool balance.
The largest loan is the 260 and 261 Madison Avenue Loan ($126.0
million -- 12.9% of the pool), which is secured
by two Class-B office towers located in midtown Manhattan on Madison
Avenue between East 36th and East 37th Street. The properties total
approximately 840,000 SF of office space, 37,000 SF
of retail space, and a 46,000 SF parking garage. This
loan represents a pari-passu portion of a $231.0
million first mortgage. As of December 2019, the properties
had a combined occupancy of 90.5%, compared to 87%
as of December 2018 and 90% at securitization. The property
faces upcoming lease roll of 19% in 2021, which includes
the largest tenant, McLaughlin & Stern LLP (12.5%
of net rentable area; 115,500 SF). The property's
NOI has declined in recent years due to increases in operating expenses.
The loan is interest only throughout its entire term and Moody's LTV and
stressed DSCR are 120% and 0.81X, respectively,
compared to 97% and 0.98X at the last review.
The second largest loan is the Prince Building Loan ($75.0
million -- 7.7% of the pool), which is secured
by a pari passu portion of a $200.0 million first-mortgage
loan. The loan is secured by the fee interest in a 12-story
retail and office building, totaling 355,000 SF and located
in the SoHo neighborhood of Manhattan. The property contains 69,346
SF of retail space and 285,257 SF of office space. The property
was built in 1897 and was acquired by the sponsor in 2003. The
property's NOI has generally declined since securitization due to
slightly lower rental revenues and significant increase in operating expenses.
The property has benefited from recent leasing and was 94% leased
as of March 2020 compared to 91% at year-end 2019.
Major office tenants at the property include Group Nine Media, Inc.
Zoc Doc and Equinox. The loan is interest only throughout its entire
term and Moody's LTV and stressed DSCR are 116% and 0.81X,
respectively, compared to 87% and 1.09X at the last
review.
The third largest loan is the Midland Park Mall Loan ($72.8
million -- 7.5% of the pool), which is secured
by a 277,659 SF portion of a 629,405 SF regional mall located
in Midland, Texas. The property's non-collateral
anchors are Dillard's and J.C. Penney. The
property also includes one vacant, former Sears, non-collateral
anchor box. The property is the dominant regional mall in the Midland-Odessa
metropolitan area and performance has continually improved since securitization
The 2019 NOI was up over 50% from 2012 as a result of significant
increases in rental revenue. The collateral was 93% leased
as of December 2019, compared to 97% leased as of March 2018.
The loan sponsor is Simon Property Group and the loan remains current
through its June 2020 payment date. The loan has amortized 14%
since securitization and Moody's LTV and stressed DSCR are 74%
and 1.46X, respectively, compared to 63% and
1.55X 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 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.
Christopher Bergman
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
