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Rating Action:

Moody's affirms six and downgrades four classes of UBSCM 2012-C1

07 Jul 2020

Approximately $976.6 million of structured securities affected

New York, July 07, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on six classes and downgraded the ratings on four classes in UBS Commercial Mortgage Trust 2012-C1 ("UBSCM 2012-C1"), Commercial Mortgage Pass-Through Certificates, Series 2012-C1 as follows:

Cl. A-3, Affirmed Aaa (sf); previously on Feb 25, 2020 Affirmed Aaa (sf)

Cl. A-AB, Affirmed Aaa (sf); previously on Feb 25, 2020 Affirmed Aaa (sf)

Cl. A-S, Affirmed Aaa (sf); previously on Feb 25, 2020 Affirmed Aaa (sf)

Cl. B, Affirmed Aa1 (sf); previously on Feb 25, 2020 Affirmed Aa1 (sf)

Cl. C, Affirmed A1 (sf); previously on Feb 25, 2020 Affirmed A1 (sf)

Cl. D, Downgraded to Ba2 (sf); previously on Apr 17, 2020 Baa2 (sf) Placed Under Review for Possible Downgrade

Cl. E, Downgraded to Caa2 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade

Cl. F, Downgraded to C (sf); previously on Apr 17, 2020 Caa3 (sf) Placed Under Review for Possible Downgrade

Cl. X-A*, Affirmed Aaa (sf); previously on Feb 25, 2020 Affirmed Aaa (sf)

Cl. X-B*, Downgraded to Caa1 (sf); previously on Apr 17, 2020 B3 (sf) Placed Under Review for Possible Downgrade

*Reflects Interest-Only Classes

RATINGS RATIONALE

The ratings on five of the P&I classes were affirmed due to the pool's share of defeasance and 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), being within acceptable ranges.

The ratings on three P&I classes were downgraded due to higher anticipated losses from a decline in pool performance, primarily driven by the increase in specially serviced loans. The largest specially serviced loan, the Poughkeepsie Galleria Mall (7.5% of the pool), transferred to special servicing in April 2020 and was experiencing deteriorating performance prior to the coronavirus pandemic. Furthermore, the deal faces upcoming refinance risk with all loans maturing prior to year-end 2022 and non-defeased hotel and retail properties representing 15% and 38% of the pool, respectively.

The rating on one of the IO classes, class X-A, was affirmed based on the credit quality of the referenced classes.

The rating on one IO Class, Class X-B, was downgraded due to a decline in the credit quality of its referenced classes.

The actions conclude the review for downgrade initiated on April 17, 2020.

The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of commercial real estate from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. 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. 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.

Moody's rating action reflects a base expected loss of 8.1% of the current pooled balance, compared to 5.1% at Moody's last review. Moody's base expected loss plus realized losses is now 6.6% of the original pooled balance, compared to 4.3% 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 methodologies used in rating all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=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 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/researchdocumentcontentpage.aspx?docid=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/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 *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

DEAL PERFORMANCE

As of the June 12th, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 24% to $1.02 billion from $1.33 billion at securitization. The certificates are collateralized by 65 mortgage loans ranging in size from less than 1% to 7.5% of the pool, with the top ten loans (excluding defeasance) constituting 34% of the pool. Twenty-four loans, constituting 48% 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 15, the same as at Moody's last review.

As of the June 2020 remittance report, loans representing 86% of the pool were current or within their grace period on their debt service payments, 4% were beyond their grace period but less than 30 days delinquent and 9% were 60+ days delinquent.

Six loans, constituting 9% of the pool, are on the master servicer's watchlist, of which one loan, representing 1% 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 $5.0 million (for a loss severity of 33.5%). Five loans, constituting 11% of the pool, are currently in special servicing.

The largest specially serviced loan is the Poughkeepsie Galleria ($76.7 million -- 7.5% of the pool), which represents a pari-passu portion of $139.4 million senior mortgage. The loan is also encumbered by $21 million of mezzanine debt. The loan is secured by a 691,000 square foot (SF) portion of a 1.2 million SF regional mall located about 70 miles north of New York City in Poughkeepsie, New York. The mall's anchors included J.C. Penney, Regal Cinemas, and Dick's Sporting Goods, each part of the collateral, and Macy's, Best Buy, Target and Sears (non-collateral anchors). However, Sears (145,000 SF) announced plans to vacate in February 2020 and J.C. Penney (180,000 SF) recently announced plans to close this location as part their Chapter 11 bankruptcy filing. As of the December 2019 rent roll the total mall was 92% leased, however, this would drop to 59% upon the Sears and J.C. Penney departures. The mall has also suffered from declining in-line space occupancy and tenant sales. As of December 2019, the inline occupancy (<10,000 SF) was only 69% occupied and potential co-tenancy provisions from multiple anchor closures may further impact inline performance. The property's net operating income (NOI) has also continued to decline from securitization with the 2019 NOI nearly 28% lower than in 2011. The property is managed by the loan's sponsor, Pyramid Management Group, LLC and the loan transferred to special servicing in April 2020 at the borrower's request as a result of the Covid-19 pandemic and is last paid through its March 2020 payment date. The loan has amortized 10% since securitization and matures in November 2021, however, as a result of the declining performance, multiple anchor closures and the current retail environment the loan may face increased term and refinance risk.

The second largest specially serviced loan is the Westminster Square Loan ($16.2 million -- 1.6% of the pool), which is secured by a 194,703 SF office building located in Providence, RI. The loan was transferred to the special servicer in October 2019 due to declines in occupancy. As of December 2019, the property was 72% occupied compared to 82% in December 2018. The special servicer indicated a pre-negotiation letter was executed and negotiations are currently underway. The loan is last paid through its March 2020 payment date and is currently 60+ days delinquent.

The third largest specially serviced loan is the Action Hotel Portfolio Loan ($13.9 million -- 1.4% of the pool), which is secured by three cross-collateralized and cross-defaulted limited-service hotels located in Syracuse, NY. The hotels total 247-rooms and operate under a Holiday Inn Express franchise. The portfolio's NOI has been declining year-over-year since 2015. The loan transferred to the special servicer in March 2020 at borrowers request as a result of the Covid-19 pandemic. The loan is current through its June 2020 payment date and the special servicer has noted that they will to monitor the loan as the borrower continues to make payments.

Moody's has also assumed a high default probability for one poorly performing loan secured by a poorly performing unanchored retail center, constituting 0.2% of the pool.

Moody's received full year 2018 operating results for 100% of the pool, and full or partial year 2019 operating results for 92% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 92%, compared to 89% 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 19% 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 1.39X and 1.26X, respectively, compared to 1.42X and 1.28X 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 15% of the pool balance. The largest loan is the Hartford 21 Loan ($68.1 million -- 6.7% of the pool), which is secured by Class A mixed-use multi-family/office/retail development located in center city Hartford, Connecticut. The property includes a 36-story residential component with 262-units and a 3-story commercial component with both buildings containing ground floor retail. As of December 2019, the residential, office, and retail portions were 96%, 46%, and 47% leased, respectively, compared to 91%, 46%, and 49% leased in December 2017. The residential portion has historically contributed over 70% of the property's rental revenue. The loan has amortized 9.1% since securitization. Moody's LTV and stressed DSCR are 126% and 0.78X, respectively the same as at the last review.

The second largest loan is the Bridgewater Falls Loan ($52.8 million -- 5.2% of the pool), which is secured by a retail power center constructed in phases from 2005-2011. The property consists of ten, one-story buildings with a total collateral net rentable area (NRA) of 389,062 SF, as well as five ground-leased outparcels with improvements totaling an additional 119,094 SF. The property is anchored by JCPenney (98,250 SF, non- collateral), Dick's Sporting Goods (50,000 SF), TJ Maxx (32,000 SF), Best Buy (30,000 SF), Bed Bath & Beyond (29,494 SF), and Michaels (22,433 SF). Additionally, the property is shadow anchored by a 123,700 SF Target. As of the December 30, 2019 rent roll the property was 94% leased compared to 90% in December 2018. However, the property faces significant near-term rollover risk with Dick's Sporting Goods, TJ Maxx, Best Buy and Bed Bath and Beyond all having lease expiration dates on January 31, 2021. The loan is current through its June 2020 payment date and Moody's LTV and stressed DSCR are 114% and 0.93X, respectively, compared to 93% and 1.08X at the last review.

The third largest loan is the Tharaldson Hotel Portfolio Loan ($33.5 million -- 3.3% of the pool), which is secured by five cross-collateralized and cross-defaulted limited-service hotels, consisting of 533-rooms. Four of the properties operate under a Marriott franchise while the remaining property operates under a Hilton franchise. The portfolio is concentrated in California with one of the hotels is in Dayton, OH. The portfolios 2019 NOI declined to $9.2 million in December 2019 from $10.4 million in December 2018 but remains significantly above securitization levels. The loan has also amortized 17% since securitization and is current through its June 2020 payment date. Moody's LTV and stressed DSCR are 73% and 1.66X, 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

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Moody's Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy."

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