Approximately $1.07 billion of structured securities affected
New York, November 18, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on nine classes and downgraded the ratings on three
classes in Wells Fargo Commercial Mortgage Trust 2013-LC12,
Commercial Mortgage Pass-Through Certificates, Series 2013-LC12
as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Feb
18, 2020 Affirmed Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Feb
18, 2020 Affirmed Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Feb
18, 2020 Affirmed Aaa (sf)
Cl. A-3FL, Affirmed Aaa (sf); previously on Feb
18, 2020 Affirmed Aaa (sf)
Cl. A-3FX, Affirmed Aaa (sf); previously on Feb
18, 2020 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Feb
18, 2020 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Feb
18, 2020 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Feb
18, 2020 Affirmed Aaa (sf)
Cl. B, Downgraded to A2 (sf); previously on Feb 18,
2020 Affirmed Aa3 (sf)
Cl. C, Downgraded to Ba1 (sf); previously on Feb 18,
2020 Affirmed A3 (sf)
Cl. PEX**, Downgraded to Baa1 (sf); previously
on Feb 18, 2020 Affirmed Aa3 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on
Feb 18, 2020 Affirmed Aaa (sf)
* Reflects interest-only classes
** Reflects exchangeable classes
RATINGS RATIONALE
The ratings on eight P&I classes were affirmed due to their credit
support and 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 P&I classes, Cl. B and Cl.
C, were downgraded due to a decline in pool performance and higher
anticipated losses from specially serviced loans, driven primarily
by the exposure to poorly performing regional malls. The deal has
exposure to four regional malls (26.9% of the pool):
Cumberland Mall (7.4% of the pool); Carolina Place
(6.8%), White Marsh Mall (6.6%) and
Rimrock Mall (6.1%). Specially serviced loans represent
16.1% of the pool, including the White Marsh Mall
loan and the Rimrock Mall loan.
The rating on the IO class was affirmed based on the credit quality of
its referenced classes.
The rating on the exchangeable class (PEX) was downgraded due to the decline
in 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 11.1%
of the current pooled balance, compared to 7.7% at
Moody's last review. Moody's base expected loss plus realized
losses is now 10.4% of the original pooled balance,
compared to 6.8% 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 principal methodology used in rating all classes except exchangeable
classes and interest-only classes was "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.
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
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 19, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 13.6% to
$1.22 billion from $1.41 billion at securitization.
The certificates are collateralized by 81 mortgage loans ranging in size
from less than 1% to 7.4% of the pool, with
the top ten loans (excluding defeasance) constituting 58.3%
of the pool. Twelve loans, constituting 7.8%
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 22,
compared to 23 at Moody's last review.
As of the October 2020 remittance report, loans representing 82%
were current or within their grace period on their debt service payments,
2% were beyond their grace period but less than 30 days delinquent,
1% were between 30 -- 59 days delinquent, 7%
were between 60 -- 89 days delinquent and 9% were greater
than 90 days or in foreclosure or REO.
Eighteen loans, constituting 27.1% of the pool,
are on the master servicer's watchlist, of which five loans,
representing 9% of the pool, indicate the borrower has requested
relief in relation to coronavirus impact on the property. 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 has been liquidated from the pool, resulting in an aggregate
realized loss of $10.9 million (for an average loss severity
of 100%). Eight loans, constituting 16.1%
of the pool, are currently in special servicing. Five of
the specially serviced loans, representing 14.8% of
the pool, have transferred to special servicing since March 2020.
The largest specially serviced loan is the White Marsh Mall Loan ($80.0
million -- 6.6% of the pool), which
represents a pari-passu portion of a $190.0 million
mortgage loan. The loan is secured by an approximately 700,000
square feet (SF) component of a 1.2 million SF super-regional
mall located in Baltimore, Maryland. The mall is anchored
by Macy's, JC Penney, Boscov's, and Macy's Home Store.
Macy's is not part of the loan collateral and Sears, a former non-collateral
anchor closed in April 2020. As of June 2020, inline and
collateral occupancy were 89% and 93%, respectively,
compared to 92% and 95% in September 2019. Property
performance declined in 2019 due to lower rental revenues and increased
inline vacancy, and the 2019 year-end net operating income
(NOI) was approximately 8% lower than underwritten levels.
The loan transferred to special servicing in August 2020 due to imminent
monetary default and is paid through its July 2020 payment date.
A pre-negotiation letter has been executed and discussions with
the borrower are ongoing. The loan is interest-only throughout
its entire term.
The second largest specially serviced loan is the Rimrock Mall Loan ($74.1
million -- 6.1% of the pool) which is secured
by an approximately 430,000 SF portion of a 586,000 SF regional
mall located in Billings, Montana. The Rimrock Mall is the
only dominant mall within a 150-mile radius. The mall is
currently anchored by Dillard's, Dillard's Men & Children (both
Dillard's spaces are non-collateral) and JCPenney. A former
anchor, Herberger's, vacated in 2018 and accounted for approximately
14% of net rentable area (NRA). CDS Performing Arts Academy
(12% of NRA) partially backfilled this space with a lease expiration
in September 2024. As of March 2020, the collateral and inline
occupancy were 82% and 91%, respectively, compared
to 95% and 91% in September 2019. Property performance
has declined significantly since securitization due to declining revenue
and increased vacancy, and the 2019 year-end NOI was approximately
42% lower than underwritten levels. The loan began amortizing
in August 2018 after its five-year interest-only period
ended and has since amortized 3.7%. The loan transferred
to special servicing in May 2020 due to imminent monetary default and
is paid through its June 2020 payment date. The appropriate next
steps are currently being evaluated and discussions continue with the
borrower.
The remaining six specially serviced loans are all secured by hotel properties
which have been impacted by business disruptions stemming from the coronavirus
pandemic. Moody's estimates an aggregate $86.1 million
loss for the specially serviced loans (47.6% expected loss
on average).
Moody's received full year 2019 operating results for 99% of the
pool, and partial year 2020 operating results for 90% of
the pool (excluding six of the eight specially serviced loans and defeased
loans). Moody's weighted average conduit LTV is 98%,
unchanged from 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 22% to the most recently available net operating income (NOI).
Moody's value reflects a weighted average capitalization rate of
9.8%.
Moody's actual and stressed conduit DSCRs are 1.64X and 1.12X,
respectively, compared to 1.74X and 1.13X 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 21% of the pool balance.
The largest loan is the Cumberland Mall Loan ($90.0 million
-- 7.4% of the pool), which represents
a pari-passu portion of a $160.0 million mortgage
loan. The loan is secured by an approximately 540,000 SF
component of a one million SF super-regional mall located in Atlanta,
Georgia. The property was built in 1973, expanded in 2006
and most recently renovated in 2012. The mall is anchored by a
Macy's (non-collateral) and a Costco Warehouse. A former
non-collateral anchor, Sears, had vacated the property
at the end of 2018. As of June 2020, collateral and inline
occupancy were 95% and 96%, respectively, compared
to 97% and 96% in September 2019. The total mall
is approximately 77% occupied when excluding the non-collateral
Sears space. Round 1 Bowling & Amusement was recently issued
permits by Cobb County to replace the 80,000 SF first floor of the
former Sears building. There are also potential plans to backfill
the second floor of the Sears building with a Dick's Sporting Goods
and Golf Galaxy. Brookfield, the loan sponsor, plans
to redevelop the area surrounding the mall into a town center with office
space, multifamily residences, retail and restaurant space.
The loan is interest-only throughout its entire term and remains
current on debt service payments. Moody's LTV and stressed DSCR
are 108% and 0.97X, respectively, compared to
93% and 1.08X at the last review.
The second largest loan is the Carolina Place Loan ($82.7
million -- 6.8% of the pool), which
represents a pari-passu portion of a $160.8 million
mortgage loan. The loan is secured by an approximately 693,000
SF component of a 1.2 million SF super-regional mall located
in Pineville, North Carolina. The mall is anchored by Dillard's,
Belk, Dick's Sporting Goods, and JCPenney. JCPenney
is the only current anchor that is part of the collateral. A former
collateral anchor, Sears, had vacated the property in early
2019. As of June 2020, collateral and inline occupancy were
73% and 92%, respectively, compared to 75%
and 95% in September 2019. Total mall occupancy declined
to 83% from 99% in June 2018, largely due to the departure
of Sears in January 2019. The loan was put on the watchlist in
September 2019 due to the occupancy dropping below 80% and the
borrower reports continuing conversations with several potential tenants.
The property benefits from being one of the primary local malls in its
trade area and is well positioned within a dense demographic area.
After an initial three-year IO period, the loan has amortized
8% since securitization. Moody's LTV and stressed DSCR are
119% and 0.95X, respectively, compared to 110%
and 0.99X at the last review.
The third largest loan is the RHP Portfolio V Loan ($76.4
million -- 6.3% of the pool), which
is secured by 10 manufactured housing communities totaling 2,416
pads located across four states - Florida, Kansas,
Utah, and New York. The properties were developed between
1966 and 1987. The average age of the properties is about 40 years.
The portfolio was collectively 95% leased as of June 2020 compared
to 88% at securitization. The loan has amortized by over
8% since securitization and Moody's LTV and stressed DSCR are 101%
and 0.96X, respectively, compared to 103% and
0.94X 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.
Fred Kasimov
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
Romina Padhi
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
