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COMM 2012-CCRE4 Mortgage Trust -- Moody's affirms four and downgrades six classes of COMM 2012-CCRE4

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Rating Action: Moody's affirms four and downgrades six classes of COMM 2012-CCRE4Global Credit Research - 17 Feb 2021Approximately $820 million of structured securities affectedNew York, February 17, 2021 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on four classes and downgraded the ratings on six classes in COMM 2012-CCRE4 Mortgage Trust, Commercial Pass-Through Certificates, Series 2012-CCRE4 as follows:Cl. A-3, Affirmed Aaa (sf); previously on Jul 1, 2020 Affirmed Aaa (sf)Cl. A-SB, Affirmed Aaa (sf); previously on Jul 1, 2020 Affirmed Aaa (sf)Cl. A-M, Downgraded to Aa2 (sf); previously on Jul 1, 2020 Affirmed Aaa (sf)Cl. B, Downgraded to Ba2 (sf); previously on Jul 1, 2020 Downgraded to A3 (sf)Cl. C, Downgraded to Caa1 (sf); previously on Jul 1, 2020 Downgraded to Ba2 (sf)Cl. D, Downgraded to C (sf); previously on Jul 1, 2020 Downgraded to Caa2 (sf)Cl. E, Affirmed C (sf); previously on Jul 1, 2020 Downgraded to C (sf)Cl. F, Affirmed C (sf); previously on Jul 1, 2020 Affirmed C (sf)Cl. X-A*, Downgraded to Aa1 (sf); previously on Jul 1, 2020 Affirmed Aaa (sf)Cl. X-B*, Downgraded to B2 (sf); previously on Jul 1, 2020 Downgraded to Baa3 (sf)* Reflects interest-only classesRATINGS RATIONALEThe ratings on two P&I classes, Cl. A-SB and Cl. A-3, 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 four P&I classes were downgraded due to a decline in pool performance, higher anticipated losses and potential interest shortfall concerns as a result of the specially serviced and troubled loans secured by regional malls with declining performance. The largest contributor to the anticipated losses is the Fashion Outlets of Las Vegas (7.3%), which has reported negative net operating income and has been real estate owned (REO) since 2018. The property was recently listed for sale and we anticipate a loss severity in excess of 100% of the current loan balance. The other specially serviced loan, Emerald Square Mall (4.0%), is last paid through April 2020 and the special servicer is evaluating all enforcement and potential disposition options. In aggregate, three loans (for a combined 25% of the pooled balance) are secured by regional malls, including Eastview Mall and Commons (14.0%), which has also experienced declines in NOI prior to 2020 and was identified as a troubled loan.The ratings on two P&I classes, Cl. E and Cl. F, were affirmed because the ratings are consistent with Moody's expected loss.The ratings on the two IO classes were downgraded due to a decline in the credit quality of their respective referenced 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 18.1% of the current pooled balance, compared to 12.9% at Moody's last review. Moody's base expected loss plus realized losses is now 14.0% of the original pooled balance, compared to 10.0% 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 RATINGSThe 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 ACTIONThe methodologies used in rating all classes except 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 Large Loan and Single Asset/Single Borrower CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579. 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, "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579 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 PERFORMANCEAs of the January 15, 2021 distribution date, the transaction's aggregate certificate balance has decreased by 23% to $854.7 million from $1.11 billion at securitization. The certificates are collateralized by 37 mortgage loans ranging in size from less than 1% to 15% of the pool, with the top ten loans (excluding defeasance) constituting 61% of the pool. Twelve loans, constituting 21% 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 11, the same as at Moody's last review.As of the January 2021 remittance report, loans representing 89% were current or within their grace period on their debt service payments, and 11% were in foreclosure or REO.Eight loans, constituting 39% of the pool, are on the master servicer's watchlist, of which three loans, representing 20% of the pool, indicate the borrower has received loan modifications in relation to the 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.Three loans have been liquidated from the pool, contributing to a minimal aggregate realized loss. Two loans, constituting 11% of the pool, are currently in special servicing.The largest specially serviced loan is the Fashion Outlets of Las Vegas Loan ($62.2 million -- 7.3% of the pool), which is secured by the leasehold interest in a 376,000 SF enclosed outlet center located in Primm, Nevada, approximately 40 miles southwest of Las Vegas. The property is located right off of I-15 at the border between California and Nevada. The property is subject to a long-term ground lease that expires in December 2048, with one 25-year renewal option. The loan was transferred to the special servicer in August 2017 due to imminent maturity default, a foreclosure process was subsequently concluded, and the property became REO in September 2018. The property has reported negative net operating income (NOI) since 2018 as revenues were insufficient to cover operating expenses. The loan has amortized almost 15% since securitization, however, as of the January 2021 remittance statement the loan has experienced over $14 million in P&I and other advances and cumulative appraisal entitlement reductions (ASERs) of $6 million. The property was recently included at auction and due to the property's performance and outstanding advances, Moody's expects a loss severity in excess of 100% of the loan's current balance.The other specially serviced loan is the Emerald Square Mall Loan ($34.0 million -- 4.0% of the pool), which represents a pari passu portion of a $97.7 million mortgage loan. The loan 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. Sears announced that they will be closing this location in early 2021. The property's performance has declined annually since securitization due to lower rental revenues and the 2019 NOI was 26% lower than in 2012. As of September 2020, collateral and inline occupancy were 75% and 63%, respectively, compared to collateral occupancy of 80% at December 2019, 83% as of March 2018 and 90% at securitization. The mall temporarily closed due to the coronavirus outbreak and re-opened in June. The loan transferred to special servicing in June 2020 due to imminent monetary default as property performance has continued to decline through 2020. The loan is last paid through its April 2020 payment date and the loan sponsor, Simon Property Group, has classified this mall under their "Other Properties." The special servicer indicated a receiver has been appointed, and the lender is evaluating all enforcement and potential disposition options. The loan has amortized by over 14% since securitization, however, due to the declining performance and current retail environment, Moody's expects a significant loss on this loan.Moody's has also assumed a high default probability for one poorly performing loan, the Eastview Mall and Commons loan (14% of the pool), which is further discussed below. Moody's has estimated an aggregate loss of $143.2 million (a 66% expected loss on average) from these specially serviced and troubled loans.The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV. As described in the CMBS methodology used to rate this transaction, we make various adjustments to the MLTV. We adjust the MLTV for each loan using a value that reflects capitalization (cap) rates that are between our sustainable cap rates and market cap rates. We also use an adjusted loan balance that reflects each loan's amortization profile. The MLTV reported in this publication reflects the MLTV before the adjustments described in the methodology.Moody's received full year 2019 operating results for 100% of the pool, and full or partial year 2020 operating results for 93% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 98%, compared to 95% 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 15% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.2%.Moody's actual and stressed conduit DSCRs are 1.81X and 1.20X, respectively, compared to 1.85X and 1.23X 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 performing loans represent 33% of the pool balance. The largest loan is The Prince Building Loan ($125.0 million -- 14.6% of the pool), which represents a pari-passu portion of a $200.0 million 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's NOI has generally declined since securitization due to slightly lower rental revenues and significant increase in operating expenses. However, the property has benefited from recent leasing and was 94% leased as of April 2020, compared to 91% in December 2019. Major office tenants at the property include Group Nine Media, Inc. ZocDoc and Equinox. Several of the new tenants have rent abatement periods which will result in depressed revenues for 2020. The loan is interest only throughout its entire term and Moody's LTV and stressed DSCR are 120% and 0.81X, respectively, compared to 116% and 0.81X at the last review.The second largest loan is the Eastview Mall and Commons Loan ($120.0 million -- 14.0% of the pool), which represents a pari-passu portion of a $210.0 million mortgage loan. The loan is secured by a 725,000 SF portion of a 1.4 million super-regional mall and an 86,000 SF portion of a 341,000 SF adjacent retail power center. The property is located in Victor, New York, approximately 15 miles southeast of Rochester. The Eastview Commons portion is a power center with major tenants including Best Buy, Staples and Old Navy with non-collateral anchors of Target & Home Depot. The Eastview Mall's non-collateral anchors include Macy's, Von Maur, JC Penney, and Lord & Taylor. The total mall, including the non-collateral anchors, was 93% leased as of June 2020 with an inline occupancy at 78%. One non-collateral anchor, Sears, vacated in 2018 but is reported to be backfilled by a Dicks Sporting Goods during 2021. The property's net operating income (NOI) has declined since securitization due to lower base rent and higher expenses and the 2019 NOI was 11% lower than in 2012. The mall is considered to be the dominant mall in the area; however, property performance has further declined as a result of the coronavirus pandemic with the year-to-date September 2020 NOI DSCR of 1.70X compared to 1.81X in 2019 and 2.01X in 2018. The loan transferred to special servicing in June 2020 due to imminent default as a result of the coronavirus outbreak, however, the loan was brought current and returned to the master servicer as a corrected loan in July 2020. The loan is interest only for its entire term. Due to the property's decline in performance, the current retail environment and the loan's upcoming maturity date in September 2022, Moody's has identified this as a troubled loan.The third largest loan is the TMI Hospitality Portfolio Loan ($36.8 million -- 4.3% of the pool), which is secured by a portfolio of five limited service and five extended stay hotels located across six states (Texas, Illinois, Michigan, South Dakota, Iowa, and Minnesota). The portfolio is represented by Residence Inn by Marriott, Fairfield Inn, Fairfield Inn & Suites, Courtyard by Marriott, and TownePlace Suites. Through year-end 2019 the property's performance had improved since securitization due to the increased revenue per available room (RevPAR) outpacing increased operating expenses. However, the property's operations were impacted by the coronavirus pandemic and the special servicer consented to the use of reserves to make June through August 2020 debt service payments and to temporarily defer the funding of such reserves. For the trailing twelve month period ending September 2020 the portfolio's NOI DSCR was 1.06X compared to 2.35X in 2019. The loan has amortized by 20% since securitization and remained current on its debt service payments subsequent to the payment relief described above. Moody's LTV and stressed DSCR are 85% and 1.48X, respectively.REGULATORY DISCLOSURESFor 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_1243406.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.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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 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 © 2021 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 CREDIT RATINGS AFFILIATES ARE THEIR 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. 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