KBRA Downgrades Four Ratings and Affirms All Other Ratings for BB-UBS Trust 2012-TFT

KBRA downgrades the ratings of four classes and affirms the ratings for the remaining classes for BB-UBS Trust 2012-TFT, a CMBS large-loan transaction. The rating actions follow a surveillance review of the transaction. The downgrades 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 their June 2024 maturity date, the uncertainty surrounding the final resolution of the loans—which are now in special servicing—and the ongoing operational challenges facing many mid-tier regional shopping malls. KBRA also considered the potential for interest shortfalls while the special servicer works to resolve the loans, as well as principal losses and recoveries from the properties.

As of the July 2024 remittance period, the transaction consists of two first-lien mortgage loans secured by the borrower’s fee simple and leasehold interests in two super-regional malls. The Tucson Mall loan ($191.4 million) is secured by a portion of the 1.3 million-sf Tucson Mall in Tucson, Arizona and the Town East Mall loan ($132.8 million) is secured by a portion of the 1.3 million-sf Town East Mall in Mesquite, Texas. The loans, which are not cross-collateralized or cross-defaulted, paid only interest prior to being modified in 2021. Post-modification, the principal balances of the loans amortize and property cash flow is being managed until the debt is paid in full. The borrower failed to repay the loans at the June maturity date and both loans are delinquent and with the special servicer as of July.

The sponsor, Brookfield Property Partners, repaid in full the third mall loan that originally secured the transaction, Fashion Place Mall ($202.0 million) in June 2021, resulting in a paydown of the Class A and Class X-A certificates at that time. The other two loans were transferred to the special servicer in May 2021 when the sponsor notified the servicer that it would not refinance the debt by the extended maturity date of June 1, 2021. The loans originally matured in June 2020, but the sponsor could not refinance the debt at that time and was granted a 12-month extension. The remaining two loans were returned to the master servicer in May 2022. The sponsor’s inability to refinance the loans this year caused the Tucson Mall to be transferred back to special servicing in April and Town East Mall to be transferred in June.

KBRA analyzed the cash flow for the properties utilizing information from the trustee and servicer to determine KNCF for each. In this review we increased our capitalization rate for both properties to 15.0%. For Tucson Mall, the analysis produced a KNCF of $12.7 million, a KBRA value of $84.5 million, and a KLTV of 226.6%. Based on KBRA’s liquidation value of the mall, there is an implied principal loss of about $107.0 million to the trust. For Town East Mall, the analysis produced a KNCF of $17.3 million, a KBRA value of $115.2 million, and a KLTV of 115.3%. Based on our liquidation value of Town East mall, the implied principal loss to the trust is $5.3 million.

KBRA maintains the loans’ K-LOC status and KPOs of Underperform because of the sponsor’s inability to refinance the debt at the original extended maturity date, the significant 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 ratings changes are as follows:

To access rating and relevant documents, click here.

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