WFRBS Commercial Mortgage Trust 2011-C3 -- Moody's affirms three classes and downgrades one class of WFRBS 2011-C3

Rating Action: Moody's affirms three classes and downgrades one class of WFRBS 2011-C3Global Credit Research - 28 Jan 2022Approximately $116 million of structured securities affectedNew York, January 28, 2022 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on three classes and downgraded the rating on one class in WFRBS Commercial Mortgage Trust 2011-C3, Commercial Mortgage Pass-Through Certificates, Series 2011-C3 as follows:Cl. D, Affirmed Ca (sf); previously on Apr 12, 2021 Downgraded to Ca (sf)Cl. E, Affirmed C (sf); previously on Apr 12, 2021 Affirmed C (sf)Cl. F, Affirmed C (sf); previously on Apr 12, 2021 Affirmed C (sf)Cl. X-B, Downgraded to C (sf); previously on Apr 12, 2021 Downgraded to Ca (sf)* Reflects Interest Only ClassesRATINGS RATIONALEThe ratings on three P&I classes were affirmed because the ratings are consistent with Moody's expected loss.The rating on the interest only (IO) class was downgraded due to the decline in the credit quality of its reference classes resulting from principal paydowns of higher quality reference classes.Moody's rating action reflects a base expected loss of 69.1% of the current pooled balance, compared to 37.9% at Moody's last review. Moody's base expected loss plus realized losses is now 7.6% of the original pooled balance, compared to 7.4% 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 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 100% of the pool is in special servicing. In this approach, Moody's determines a probability of default for each specially serviced 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 class(es) and the recovery as a pay down of principal to the most senior class(es).DEAL PERFORMANCEAs of the January 18, 2022 distribution date, the transaction's aggregate certificate balance has decreased by 90% to $141 million from $1.45 billion at securitization. The certificates are collateralized by three specially serviced loans, secured by regional mall loans. Two of the specially serviced loans (86% of the pool balance) are already real estate owned (REO).The largest specially serviced loan is the Park Plaza Loan ($74.2 million -- 52.6% of the pool), which is secured by a three-story, 283,000 square foot (SF), enclosed regional mall located in Little Rock, Arkansas. Dillard's anchors the mall, which is not included as part of the collateral. The largest collateral tenants include H&M (10.4% of the net rentable area (NRA); lease expiration in 2028) and Forever 21 (8.8% of the NRA; lease expiration in 2023). As of June 2021, the collateral was 83% leased, compared to 97% at securitization. The loan transferred to special servicing in June 2019 for imminent monetary default. The property's net operating income (NOI) has declined since 2012 and the year-end 2019 NOI was approximately 28% lower than in 2012 , and the year-end 2020 NOI was approximately 55% lower than in 2012. The decline in NOI is due to lower rental revenue driven by tenant departures. Furthermore 2019 mall store sales, as reported by the sponsor, declined to $314 per square foot (PSF) from $319 in 2018 and $330 in 2017. The loan did not pay off at its maturity in April 2021 and the property became REO in October 2021. The loan has amortized 25% since securitization, however, the servicer has recognized an appraisal reduction of over $47 million. Due to the property's continued decline in performance, Moody's anticipates a significant loss on this loan.The second largest specially serviced loan is the Oakdale Mall Loan ($47.5 million -- 33.7% of the pool), which is secured by a 709,000 SF enclosed regional mall located in Johnson City, New York. The mall is anchored by a JC Penney (13% of NRA; lease expiration in July 2025) and Burlington Coat Factory (12% of NRA; lease expiration in August 2023). Three anchor tenants have vacated since securitization; non-collateral Sears (vacated in September 2017), a ground leased Macy's (April 2018) and Bon Ton (Summer 2018) and all three spaces remain vacant. As of June 2021, the property was 76% leased, compared to 93% at securitization. Furthermore the 2019 comparable inline sales were less than $300 per square foot. The loan was transferred to special servicing in July 2018 due to imminent monetary default and the servicer has recognized an appraisal reduction of over $40 million. In September 2020, the special servicer obtained title to the property via deed in lieu. Moody's anticipates a significant loss on this loan.The third largest specially serviced loan is the Hampshire Mall Loan ($19.3 million -- 13.7% of the pool), which is secured by an approximately 342,500 SF portion of a 462,000 SF regional mall located in Hadley, Massachusetts, three miles south of the UMASS-Amherst campus. Major tenants at the property include J.C. Penney, Cinemark Theaters, Dick's Sporting Goods, Trader Joe's, and Target (which is not a part of the collateral). The collateral was 82% leased as of June 2021, compared 86% at securitization. The loan is sponsored by Pyramid Management Group. While the property's performance had improved in recent years with the 2019 NOI up over 30% since 2016, the loan transferred to special servicing in April 2020 for monetary default at the borrower's request as a result of the coronavirus pandemic. The loan has amortized 23% since securitization and matured in April 2021. The loan is last paid through its April 2020 payment date. The servicer has recognized an appraisal reduction of over $5 million. The borrower has submitted an updated proposal that is under review and consideration.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.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. Dariusz Surmacz Vice President - Senior Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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