Fitch Affirms UBS-BB 2012-C4.
KEY RATING DRIVERS
Increased Credit Enhancement/Stable Loss Expectations: The rating affirmations reflect increasing credit enhancement due to paydown and additional defeasance since last rating action. As the majority of the pool continues to exhibit stable performance, Fitch's loss expectations remain relatively stable.
As of the September 2018 distribution date, the pool's aggregate principal balance has been reduced by 13.4% to $1.26 billion from $1.46 billion at issuance. Fourteen loans (6.5%) have been defeased. There are two loans in special servicing (1.0%) and seven loans (10.8% of the remaining pool balance), including the specially serviced loans, have been designated as Fitch Loans of Concern (FLOCs). The pool has not realized any losses and interest shortfalls are currently impacting class G. Of the 87 loans remaining in the pool, 11 (27.8%) have an interest-only period before beginning to amortize. Seventy loans (50.4%) are amortizing balloon loans, and six (21.7%) are interest-only for the entire loan term.
Loans of Concern/Specially Serviced Loans: Eleven loans (6.5%) are on the servicer's watchlist, one (0.5%) is performing specially serviced, one (0.5%) is REO, and five (9.9%) are Fitch Loans of Concern.
Worthington on the Beltway (0.5%) is a multifamily property located in Houston, Texas that transferred to special servicing in December 2016 after a fire in 2013 damaged 40 units in Building 1 and repairs were never completed. Litigation is currently pending regarding the borrower's failure to repair fire damaged units.
Hickory Commons (0.5%) is a retail property located in Memphis, TN that transferred to special servicing in January 2017 for imminent default when Burlington Coat Factory (46% NRA) indicated they would vacate when their lease expired in February 2017. The property became REO in July 2017 and the special servicer is working to lease up vacant space and market the property for sale.
Other FLOCs include Newgate Mall (4.6%), a regional mall with a vacant anchor, declining cash flow, and upcoming tenant rollover; Sun Development Portfolio (2.5%), a hotel portfolio that experienced occupancy declines due to PIPs at four of the five properties that impacted property performance; Courtyard Columbus at Easton Town Center (1.5%), a hotel that experienced a decline in cash flow due to a full renovation that took 60 out of 126 rooms offline; Gaithersburg Office Portfolio (1.1%), an office portfolio in suburban Maryland with NOI below expectations; and Virginia College (0.3%), a single-tenant retail building where the single tenant is vacating ahead of their lease expiration.
Regional Mall Exposure: Two of the top five loans in the pool, Visalia Mall (5.9%) and Newgate Mall (4.6%) are regional malls with full-term interest only loans that mature in May and June 2020. Visalia Mall is a regional mall in Visalia, CA anchored by Macy's, JC Penney, and Old Navy. The property was 96.2% occupied and reported a 2Q 2018 IO DSCR of 3.69x. Newgate Mall is a regional mall in Ogden, UT that is anchored by Dillard's, Burlington Coat Factory, and Downeast Home. Sears (30.1% of the collateral net rentable area) went dark in early 2018. In addition, the property has experienced declining cash flow and is not the dominant mall in its trade area. Fitch's base case analysis included an additional 20% haircut to reported NOI and a sensitivity analysis assumed a 50% loss on the mall.
Single Tenant Exposure: Two of the 10 largest assets, representing 14.8% of the pool, are occupied by a single tenant or present exposure in excess of 80% of the NRA to a single tenant, creating risk to property performance.
Maturity Concentration: Both loans collateralized by regional malls (10.5%) mature in 2020 while the remainder of the pool (89.5%) matures in 2022.
The Negative Outlooks on classes E and F reflect the potential for outsized losses on Newgate Mall and the specially serviced loans. Fitch ran a sensitivity scenario assuming a 50% loss severity on Newgate Mall. In this scenario, classes E and F would be subject to a downgrade. As the maturity date for Newgate Mall approaches, Fitch may assume a higher loss severity scenario. As a result, additional classes may be put on Outlook Negative, or if the loan defaults, classes may be downgraded. Outlooks for classes A-3 through D remain Stable due to overall stable performance, increased credit enhancement and continued amortization. Upgrades may occur with improved pool performance and additional paydown or defeasance.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided to or reviewed by Fitch in relation to this rating action.
Fitch has affirmed the following ratings:
--$112.1 million class A-3 at 'AAAsf'; Outlook Stable;
--$150 million class A-4 at 'AAAsf'; Outlook Stable;
--$476 million class A-5 at 'AAAsf'; Outlook Stable;
--$86.8 million class A-AB 'AAAsf'; Outlook Stable;
--$145.6 million class A-S at 'AAAsf'; Outlook Stable;
--$970.5 billion* class X-A at 'AAAsf'; Outlook Stable;
--$134.7 million* class X-B at 'A-sf'; Outlook Stable;
--$69.2 million class B at 'AA-sf'; Outlook Stable;
--$65.5 million class C at 'A-sf'; Outlook Stable;
--$61.9 million class D at 'BBB-sf'; Outlook Stable;
--$25.5 million class E at 'BBsf'; Outlook Negative;
--$18.2 million class F at 'Bsf'; Outlook Negative.
*Notional amount and interest-only.
Classes A-1 and A-2 have been paid in full. Fitch does not rate the $51 million class G.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Jan 7, 2019|
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