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UBS-Citigroup Commercial Mortgage Trust 2011-C1 -- Moody's affirms two, downgrades five classes and places two classes on review for downgrade in UBSC 2011-C1

Rating Action: Moody's affirms two, downgrades five classes and places two classes on review for downgrade in UBSC 2011-C1Global Credit Research - 13 Dec 2021Approximately $101.7 million of structured securities affectedNew York, December 13, 2021 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on two classes, downgraded the ratings on five classes and placed two classes on review for possible downgrade in UBS-Citigroup Commercial Mortgage Trust 2011-C1 ("UBSC 2011-C1"), Commercial Mortgage Pass-Through Certificates, Series 2011-C1 as follows:Cl. B, Downgraded to Baa1 (sf) and Placed Under Review for Possible Downgrade; previously on Apr 23, 2021 Downgraded to A2 (sf)Cl. C, Downgraded to B1 (sf) and Placed Under Review for Possible Downgrade; previously on Apr 23, 2021 Downgraded to Ba1 (sf)Cl. D, Downgraded to Caa3 (sf); previously on Apr 23, 2021 Downgraded to Caa1 (sf)Cl. E, Downgraded to C (sf); previously on Apr 23, 2021 Downgraded to Caa3 (sf)Cl. F, Affirmed C (sf); previously on Apr 23, 2021 Downgraded to C (sf)Cl. G, Affirmed C (sf); previously on Jul 7, 2020 Downgraded to C (sf)Cl. X-B*, Downgraded to Ca (sf); previously on Apr 23, 2021 Downgraded to Caa3 (sf)*Reflects Interest-Only ClassRATINGS RATIONALEThe ratings on the P&I classes were downgraded due to increased interest shortfall risks and the significant exposure to specially serviced loans. Four loans, representing 95% of the pool, are in specially servicing, of which three loans (82% of the pool) have been deemed non-recoverable by the master servicer as of the November 2021 remittance date. As a result of the exposure to specially serviced loans, as of the November 2021 remittance statement interest shortfalls impacted all of the remaining principal and interest (P&I) certificates. Furthermore, the largest two largest specially serviced loans, The Poughkeepsie Galleria Mall (50% of the pool) and Marriott Buffalo Niagara (18%), have both experienced significant decline in performance and value in recent years.The ratings on Cl. B and Cl. C were placed on review for possible downgrade due to current interest shortfalls impacting these classes in addition to the uncertainty regarding the loan payoffs on the Hospitality Specialists Portfolio - Pool 1 loan. The remaining balance of this loan exceeds the certificate balance of Cl. B and a forbearance agreement is currently being negotiated to provide additional time to pay off the loan. Due to the exposure to non-recoverable specially serviced loans, Cl. B and Cl. C may continue to receive interest shortfalls until one or more of the specially serviced loans are resolved.The ratings on two P&I classes, Cl. F and Cl. G, were affirmed because the ratings are consistent with Moody's expected loss plus realized losses.The rating on the IO Class, Cl. X-B, was downgraded due to a decline in the credit quality of its referenced classes. The IO Class references all P&I classes including Class H, which is not rated by Moody's.Today's action reflects the coronavirus pandemic's residual impact on the ongoing performance of commercial real estate as the US economy continues on the path toward normalization. Economic activity will continue to strengthen in 2021 because of several factors, including the rollout of vaccines, growing household consumption and an accommodative central bank policy. However, specific sectors and individual businesses will remain weakened by extended pandemic related restrictions. Stress on commercial real estate properties will be most directly stemming from lower hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales at certain 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 63.1% of the current pooled balance, compared to 19.1% at Moody's last review. The pool has paid down nearly 70% since last review and Moody's base expected loss plus realized losses is now 11.4% of the original pooled balance, compared to 11.3% 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 and/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, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.METHODOLOGY UNDERLYING THE RATING ACTIONThe principal methodology used in rating all classes except interest-only classes was "Large Loan and Single Asset/Single Borrower Commercial Mortgage-Backed Securitizations Methodology" published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1250766. The methodologies used in rating interest-only classes were "Large Loan and Single Asset/Single Borrower Commercial Mortgage-Backed Securitizations Methodology" published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1250766 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.Moody's analysis incorporated a loss and recovery approach in rating the P&I classes in this deal since 95% of the pool is in special servicing. In this approach, Moody's determines a probability of default for each specially serviced and troubled loan that it expects will generate a loss and estimates a loss given default based on a review of broker's opinions of value (if available), other information from the special servicer, available market data and Moody's internal data. The loss given default for each loan also takes into consideration repayment of servicer advances to date, estimated future advances and closing costs. Translating the probability of default and loss given default into an expected loss estimate, Moody's then applies the aggregate loss from specially serviced to the most junior classes and the recovery as a pay down of principal to the most senior classes.DEAL PERFORMANCEAs of the November 2021 distribution date, the transaction's aggregate certificate balance has decreased by 82% to $121.9 million from $673.9 million at securitization. The certificates are collateralized by five remaining mortgage loans. Four of the five loans, representing 95% of the pool, have passed their original scheduled maturity dates and are currently in special servicing. Furthermore, as of the November 2021 remittance statement three special serviced loans (82% of the pool) have been deemed non-recoverable by the master servicer. The one non-specially serviced loan, 5% of the pool, is on the master servicer's watchlist with a scheduled maturity date in December 2021.As of the November 2021 remittance statement cumulative interest shortfalls were $3.37 million and impacted each of the remaining P&I certificates. Moody's anticipates interest shortfalls will continue because of the exposure to specially serviced loans and/or modified loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal entitlement reductions (ASERs), non-recoverable determinations, loan modifications and extraordinary trust expenses.One loan has been liquidated from the pool, resulting in a realized loss of $81,661 (for a loss severity of 1.2%).The largest specially serviced loan is the Poughkeepsie Galleria Loan ($61.2 million -- 50% of the pool), which represents a pari-passu portion of $135.9 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 at securitization included a J.C. Penney, Regal Cinemas, and Dick's Sporting Goods, each part of the collateral, along with a Macy's, Best Buy, Target, and Sears (non-collateral anchors). However, Sears (145,000 SF) and J.C. Penney (180,000 SF) vacated in 2020. As of the June 2021 the collateral portion of the mall was 61% leased compared to 85% in December 2019. The mall has also suffered from declining in-line occupancy and tenant sales. The property's net operating income (NOI) remains significant below securitization levels. The 2019 NOI was already nearly 28% lower than in 2011, and the property's NOI dropped an additional 49% year over year between 2019 and 2020. The 2021 NOI rebounded from its low in 2020, however, the NOI DSCR as of June 2021 was only 0.82X. The property is managed by the loan's sponsor, Pyramid Management Group, LLC. The loan has been in special servicing since April 2020 and is last paid through its November 2020 payment date. The loan passed its original maturity date in November 2021 and the property's most recently reported appraisal value from November 2020 was 71% lower than at securitization. As of the November 2021 remittance data the loan has been non-recoverable by the master servicer and special servicer commentary indicates they continue to work with the Borrower on an updated resolution proposal.The second largest specially serviced loan is the Marriott Buffalo Niagara Loan ($21.3 million -- 18% of the pool), which is secured by the borrower's fee simple interest in a 356-room full-service hotel located in Amherst, NY. The property's revenue per available room (RevPAR) has declined annual since 2015 and the September 2019 trailing-twelve-month NOI had already declined 44% from 2012. The property's cash flows were significantly by pandemic and both the full year 2020 and year to date June 2021 annualized cash flows were not sufficient to cover its operating expenses. The loan transferred has been in special servicing in April 2020 and is last paid through its January 2021 payment date. In January 2021 the borrower noted that they did not plan to contribute any additional equity towards the property and foreclosure proceedings are in progress with a receiver appointed in August 2021. The property's most recently reported appraisal value from March 2021 was 76% below the appraisal value at securitization and as of the November remittance statement the master servicer had deemed the loan non-recoverable.The third largest specially serviced loan is the Hospitality Specialists Portfolio -- Pool 2 Loan ($17.3 million -- 14% of the pool), which is secured by a portfolio of three select-service hotels totaling 257 rooms. Two of the properties are in Moline, IL (one Hilton and one Marriott flag) and one property is in Stevensville, MI (Hilton). The portfolio has realized a significant decline in NOI recent years, with the 2019 NOI already dropping nearly 20% compared to 2018. The decline in performance was largely driven by the Stevensville, MI property due to seasonality issues and additional supply added to the market in 2019. The NOI further declined as a result of the pandemic and the loan ultimately transferred to special servicing in February 2021. As of the year-to-date June 2021 financials, the loan had an NOI DSCR of 0.12x. The loan has amortized 21% since securitization and is last paid through its April 2021 payment date. The property's most recently reported appraisal value from August 2021 was 41% below the appraisal value at securitization and as of the November 2021, the master servicer has deemed the loan non-recoverable. The special servicer is currently dual tracking legal remedies while preparing for a Deed-in-Lieu of foreclosure.The remaining specially serviced loan is the Hospitality Specialists Portfolio -- Pool 1 ($16.5 million -- 13.5% of the pool), which is secured by a portfolio of three select-service hotels totaling 285 rooms. Two of the properties are in Grand Rapids, MI (one Marriott and one Hilton flag) and one property is in Holland, MI (Marriott). Prior to 2020, the portfolio had performed well as compared to securitization and as of December 2019, the portfolio's NOI DSCR was 1.89X in 2019. However, the portfolio's performance has been negatively impacted as a result of the pandemic and the loan reported an NOI DSCR of 0.31X as of year to date in June 2021. The Borrower received temporary payment relief in the form of a forbearance agreement in 2020, however, the loan transferred to special servicing in March 2021 for imminent monetary default at the borrower's request. The loan has amortized 21% since securitization and is last paid through its October 2021 payment date (the original maturity date of the loan). Special servicer commentary indicates negotiations are currently ongoing between the borrower and lender regarding an additional forbearance period in order to provide additional time to secure financing to pay off the loan.Moody's estimates an aggregate $76.6 million loss for the specially serviced loans (66% expected loss on average).The one remaining conduit loan is the Preston Lloyd Shopping Center Loan ($5.5 million -- 4.5% of the pool), which is secured by a 53,983 SF retail property in Dallas, TX, approximately 15 miles north of the Dallas central business district. As of June 2021, the property was 81% leased, compared to 74% in 2020 and 2019. In June 2020, the largest tenant expanded their space within the property and currently makes up 17% of the NRA with a lease expiration in December 2027. The property's NOI had fallen 20% in 2020 but has since recovered as of the June 2021 annualized financials with a reported NOI DSCR 1.34x and an NOI debt yield of 11.3%. The loan had an original scheduled maturity date in December 2021.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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.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. 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 © 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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