Approximately $994 million of structured securities affected
New York, February 25, 2020 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on nine classes and downgraded the ratings on three
classes in WFRBS Commercial Mortgage Trust 2012-C10 ("WFRBS 2012-C10"),
Commercial Mortgage Pass-Through Certificates Series 2012-C10
as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Nov
9, 2018 Affirmed Aaa (sf)
Cl. A-FL, Affirmed Aaa (sf); previously on Nov
9, 2018 Affirmed Aaa (sf)
Cl. A-FX, Affirmed Aaa (sf); previously on Nov
9, 2018 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Nov
9, 2018 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Nov
9, 2018 Affirmed Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Nov 9,
2018 Affirmed Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on Nov 9,
2018 Affirmed A3 (sf)
Cl. D, Downgraded to Ba2 (sf); previously on Nov 9,
2018 Affirmed Baa3 (sf)
Cl. E, Downgraded to B3 (sf); previously on Nov 9,
2018 Downgraded to B1 (sf)
Cl. F, Downgraded to Caa3 (sf); previously on Nov 9,
2018 Downgraded to Caa1 (sf)
Cl. X-A*, Affirmed Aaa (sf); previously on
Nov 9, 2018 Affirmed Aaa (sf)
Cl. X-B*, Affirmed A2 (sf); previously on
Nov 9, 2018 Affirmed A2 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on seven 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 three P&I classes, Cl. D, Cl.
E and Cl. F were downgraded due to a decline in pool performance
driven primarily by exposure to regional malls representing 14%
of the outstanding pooled balance that have experienced declines in net
operating income (NOI). The loans include Dayton Mall, Animas
Valley Mall and Towne Mall.
The ratings on the IO classes were affirmed based on the credit quality
of their referenced classes.
Moody's rating action reflects a base expected loss of 7.4%
of the current pooled balance, compared to 4.0% at
Moody's last review. Moody's base expected loss plus realized
losses is now 5.9% of the original pooled balance,
compared to 3.3% 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 the interest-only
classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published
in July 2017. The methodologies used in rating interest-only
classes 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 February
2019. Please see the list of ratings at the top of this announcement
to identify which classes are interest-only (indicated by the *).
Please see the Rating Methodologies page on www.moodys.com
for a copy of these methodologies.
DEAL PERFORMANCE
As of the February 18, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 21% to $1.04
billion from $1.31 billion at securitization. The
certificates are collateralized by 72 mortgage loans ranging in size from
less than 1% to 11% of the pool, with the top ten
loans (excluding defeasance) constituting 56% of the pool.
One loan, constituting 11% of the pool, has an investment-grade
structured credit assessment. Thirteen loans, constituting
6% 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 20,
compared to 22 at Moody's last review.
Nine loans, constituting 22% 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.
There have been no loans liquidated from the pool and there are no loans
currently in special servicing.
Moody's has assumed a high default probability for four poorly performing
loans, constituting 11% of the pool, and has estimated
an aggregate loss of $38.3 million (a 35% expected
loss on average) from these troubled loans.
Moody's received full year 2018 operating results for 100% of the
pool, and full or partial year 2019 operating results for 98%
of the pool (excluding specially serviced and defeased loans).
Moody's weighted average conduit LTV is 95%, compared
to 96% 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
10.1%.
Moody's actual and stressed conduit DSCRs are 1.62X and 1.24X,
respectively, compared to 1.68X and 1.25X 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 loan with a structured credit assessment is the Concord Mills Loan
($110.0 million -- 10.6% of
the pool), which represents a pari-passu participation of
a $235 million mortgage loan. The loan is secured by a 1.28
million square foot (SF) super-regional mall located in Concord,
North Carolina. Major tenants include Bass Pro Shops Outdoor,
Burlington Coat Factory and AMC Corporation. The mall was 96%
leased as of September 2019 compared to 97% in June 2018.
Inline occupancy for the same period was 89% compared to 92%.
While occupancy has remained stable compared to last review and securitization,
financial performance has steadily improved due to an increase in rental
revenue. Moody's structured credit assessment and stressed DSCR
are a2 (sca.pd) and 1.34X, respectively, the
same as at last review.
The top three conduit loans represent 24% of the pool balance.
The largest loan is the Republic Plaza Loan ($115.9 million
-- 11.2% of the pool), which represents
a pari-passu portion of a $259.7 million loan.
The loan is secured by a 56-story Class-A trophy office
tower and a separate 12-story parking garage located in downtown
Denver, Colorado. Major tenants include Encana Oil &
Gas, DCP Midstream, LP and Wheeler Trigg O'Donnell LLP.
The tower was 84% leased as of December 2019, compared to
92% in June 2018, 87% in December 2017 and 95%
at securitization. Moody's LTV and stressed DSCR are 112%
and 0.87X, respectively, compared to 114% and
0.85X at the last review.
The second largest loan is the Dayton Mall Loan ($78.9 million
-- 7.6% of the pool), which is secured
by a 778,500 SF, two-story regional mall located in
Dayton, Ohio. The mall's current anchor tenants include Macy's
(non-collateral), JC Penney (collateral) and Dick's Sporting
Goods (collateral). Sears, a prior non-collateral
anchor, closed at this location during 2018. The mall has
had other major tenants shutter due to bankruptcy including a 203,000
SF Elder Beerman (non-collateral) in early 2018 and a 30,000
SF HHgregg (collateral) in 2017. The former HHgregg space has since
been replaced by Ross Dress for Less which opened in October 2019.
The total mall was 88% leased as of September 2019 compared to
96% in June 2018 and 92% at securitization. Excluding
the vacant anchor spaces (Sears and Elder Beerman), total occupancy
is approximately 66%. As of September 2019, inline
occupancy was 71% compared to 79% in June 2018. Due
to the decline in NOI and DSCR, Moody's considers this as
a troubled loan.
The third largest loan is the STAG REIT Portfolio Loan ($51.3
million -- 4.9% of the pool), which
was originally secured by 28 industrial buildings totaling 3.6
million SF and located throughout eight states. Four of the properties
have since defeased and one has been released and currently only 23 properties
remain totaling 3.3 million SF. The portfolio was 94%
leased as of September 2019, compared to 90% in December
2017 and 98% at securitization. Excluding the defeased properties,
Moody's LTV and stressed DSCR are 70% and 1.58X, respectively,
compared to 72% and 1.54X at the last review.
There are two additional loans that are secured by malls in tertiary markets
which have experienced declines in operating performance. The Animas
Valley Mall Loan ($44.9 million -- 4.3%
of the pool), is secured by an approximately 477,000 SF regional
mall located in Farmington, New Mexico. It is the only regional
enclosed mall in the trade area (30 miles radius) and the only regional
mall serving the Farmington MSA and the Four Corners market of NM,
CO, AZ and UT. The mall was 90% leased as of September
2019 (inline occupancy was 77%). However, as of February
2020, Sears (14% of Net Rentable Area (NRA)) has closed at
this location. Moody's LTV and stressed DSCR are 122% and
0.99X, respectively, compared to 113% and 1.08X
at the last review.
The other mall with a decline in performance is the Towne Mall Loan ($20.3
million -- 2.0% of the pool), which
is secured by a 354,000 SF regional shopping mall located along
the primary commercial district in Elizabethtown, Kentucky approximately
three miles south of the CBD. Sears (20% of NRA) closed
in October 2019 and was temporarily replaced by a Spirit Halloween store.
The loan is on the watchlist due to low DSCR, as a result of declining
occupancy since 2015. The total mall was 89% leased as of
September 2019, unchanged from June 2018 and compared to 94%
at year-end 2015. The property would be 69% leased
without the Spirit Halloween tenant. Moody's LTV and stressed DSCR
are 122% and 0.99X, respectively, compared to
95% and 1.20X 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 of the disclosure form.
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.
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.
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
