NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 15 classes of German American Capital Corp.'s Wells Fargo Commercial Mortgage Trust (COMM) commercial mortgage pass-through certificates, series 2012-CCRE2. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are based on the overall stable performance of the pool's underlying collateral since issuance. As of the May 2016 distribution date, the pool's aggregate principal balance has been reduced by 10.6% to $1.18 billion from $1.32 billion at issuance. Per the servicer reporting, one loan (0.3% of the pool) is defeased and there are no specially serviced loans. De minimis interest shortfalls are currently affecting class H.
Fitch modeled losses of 4% of the remaining pool; expected losses on the original pool balance total 3.4%. The pool has experienced no realized losses to date. Fitch has designated six loans (5.2%) as Fitch Loans of Concern. The deterministic stress scenario was used in Fitch's analysis. In addition, there were three variances from criteria related to classes C, C-PEZ, and D, for which the model output suggested that upgrades were possible. Fitch determined, however, that upgrades are not warranted at this time as there has been no material improvement to the performance of the pool since issuance and no significant increase in credit enhancement.
Additionally, approximately 71% of the pool is comprised of Top 15 loans with significant near-term roll and/or major tenant expirations occurring prior to loan maturity. The pool is concentrated by asset type with loans secured by office properties comprising 56% of the pool (53% within the Top 15). Two loans (2.3%) are scheduled to mature before 2022. Continued paydown is expected with 74% of the pool representing amortizing balloon loans.
The largest loan in the pool (9.4%) is secured by a 615,953 square foot (sf) office building located in downtown Los Angeles, CA. As of the June 2016 rent roll, the property was 96.4% occupied with tenant rollover of approximately 19% NRA through year-end (YE) 2017. The largest tenants include L.A. Care (25.6% net rentable area [NRA]) and Morris Polich & Purdy (6.5% NRA), which recently downsized from 7.7% NRA with their May 2016 lease renewal. The servicer-reported YE 2015 debt service coverage ratio (DSCR) was 1.28x compared to 1.34x at YE 2014.
The largest Fitch Loan of Concern (2.5%) is secured by a five building, 228,156 sf office park located in Blue Bell, PA. As of the December 2015 rent roll, the property was 83.9% occupied. The largest tenant, Cigna Healthcare, currently leases 16% of the property's NRA with a lease expiration of Oct. 31, 2016. The loan has been on the master servicer's watchlist since February 2016 due to the trigger of a cash flow sweep period. Per lease documents, the servicer has implemented a cash trap after Cigna failed to renew their entire space by Jan. 31, 2016. According to the master servicer, Cigna has yet to indicate if they will renew their lease. Additionally, approximately 37% of additional rollover is scheduled to occur through YE 2017.
RATING SENSITIVITIES
Rating Outlooks for all classes remain Stable due to the overall stable performance of the pool. Upgrades to senior classes, while not likely in the near term, are possible with increased credit enhancement and overall improved pool performance. Downgrades to the classes are possible should overall performance decline.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch affirms the following classes:
--$37 million class A-2 at 'AAAsf'; Outlook Stable;
--$102 million class A-SB at 'AAAsf'; Outlook Stable;
--$100 million class A-3 at 'AAAsf'; Outlook Stable;
--$546.3 million class A-4 at 'AAAsf'; Outlook Stable;
--$915.7 million class X-A* at 'AAAsf'; Outlook Stable;
--$77.6 million class A-M at 'AAAsf'; Outlook Stable;
--$52.8 million class A-M-PEZ** at 'AAAsf'; Outlook Stable;
--$37.3 million class B at 'AAsf'; Outlook Stable;
--$25.4 million class B-PEZ** at 'AAsf'; Outlook Stable;
--$25.5 million class C at 'Asf'; Outlook Stable;
--$17.4 million class C-PEZ** at 'Asf'; Outlook Stable;
--$23.1 million class D** at 'BBB+sf'; Outlook Stable;
--$51.2 million class E at 'BBB-sf'; Outlook Stable;
--$23.1 million class F at 'BBsf'; Outlook Stable;
--$23.1 million class G at 'Bsf'; Outlook Stable.
*Notional amount and interest-only.
**Up to the full certificate balance of the class A-M-PEZ, class B-PEZ and class C-PEZ certificates and up to $9,363,000 in certificate balance of the class D certificates may be exchanged for class PEZ certificates. Class PEZ certificates may be exchanged for up to the full certificate balance of the class A-M-PEZ, class B-PEZ and class C-PEZ certificates and up to $9,363,000 in certificate balance of the class D certificates.
Fitch does not rate the class X-B, PEZ, and H certificates. Class A-1 has paid in full.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Rating Caps and Limitations in Global Structured Finance
Transactions (pub. 16 Jun 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882401
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S.
Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395
Related Research
COMM 2012-CCRE2 -- Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686089
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1006196
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1006196
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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