KBRA Downgrades All Ratings for COMM 2012-LTRT

KBRA downgrades the ratings for all classes of COMM 2012-LTRT, a CMBS large loan securitization. The downgrades follow a surveillance review of the transaction and reflect the continued decline in KBRA’s value of both collateral properties since last review and securitization, the sponsor’s inability to refinance the loans at the October 2024 extended maturity dates, the uncertainty surrounding the final resolution of the loans, one of which is specially serviced, and the ongoing financing challenges facing many mid-tier regional shopping malls. KBRA also considered the potential for interest shortfalls to increase while the special servicer works to resolve the loans as well as principal losses and recoveries from the properties.

The transaction collateral consists of two non-recourse, first lien mortgage loans secured by the fee simple interests in 539,364 sf of Westroads Mall, a 1.1 million sf super-regional mall located in Omaha, Nebraska and 582,332 sf of the Oaks Mall, a 906,832 sf super-regional mall located in Gainesville, Florida. The loans are not cross-collateralized or cross-defaulted and each loan’s sponsor is Brookfield Property Partners. Westroads Mall loan has an outstanding balance of $89.8 million and the Oaks Mall loan has an outstanding balance of $77.6 million, resulting in a combined outstanding principal balance of $167.4 million. Both loans originally matured in October 2022, and each was modified and extended for two years with an extended final maturity in October 2024. The loans did not pay off at the extended maturity date in October 2024. As of the January 2025 remittance period, Westroads’s status is performing matured balloon. According to the servicer, the sponsor is seeking a three-year extension which is under review. Oaks is reported as non-performing matured balloon, specially serviced, and no workout plan has been provided. The transaction documents state the special servicer cannot extend the maturity date beyond October 2025. The Rated Final Distribution Date for the transaction is October 2030.

KBRA analyzed the cash flow for the properties utilizing information from the trustee and servicer to determine KNCF. For Westroads Mall, the analysis produced a KNCF of $12.2 million, resulting in a KBRA value of $111.0 million and a KLTV of 80.8%. For the Oaks Mall, the analysis produced a KNCF of $7.8 million, resulting in a KBRA value of $60.3 million and a KLTV of 128.7%. Based on KBRA’s liquidation value of the Oaks Mall, there is an implied principal loss of approximately $17.9 million to the trust.

KBRA maintains the loans’ K-LOC status and KPOs of Underperform because of the sponsor’s inability to refinance the debt at the extended maturity date, the decline in the value of both malls since securitization, and the uncertainty regarding the final disposition of the collateral assets.

Details for the classes with rating changes are as follows:

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