Morningstar DBRS Downgrades Credit Ratings on Two Classes of COMM 2012-LTRT Mortgage Trust CMBS, Changes Trends on Two Classes to Negative from Stable

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on two classes of COMM 2012-LTRT Commercial Mortgage Pass-Through Certificates, Series 2012-LTRT issued by COMM 2012-LTRT Mortgage Trust as follows:

-- Class D to C (sf) from CCC (sf)
-- Class E to C (sf) from CCC (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:
-- Class X-A at AA (sf)
-- Class A2 at AA (low) (sf)
-- Class B at A (low) (sf)
-- Class C at B (high) (sf)

Morningstar DBRS also changed the trends on Classes B and C to Negative from Stable. The trend on Class A-2 remains Stable and Classes D and E have credit ratings that do not typically carry a trend in commercial mortgage backed securities (CMBS) credit ratings.

The credit rating downgrades and Negative trends reflect the increased risks for the transaction in Morningstar DBRS' increased liquidated loss expectations for one of the underlying loans, The Oaks Mall, which is in special servicing and was recently re-valued as part of a December 2024 appraisal obtained by the special servicer, and the sustained net cash flow (NCF) for the Westroads Mall loan, as further described below.

The underlying collateral represents two mortgage loans secured by two regional mall properties; the loans are not cross collateralized or cross defaulted. The largest of the two loans, Westroads Mall (collateral mall in Omaha, Nebraska), had an outstanding principal balance of $88.3 million as of the May 2025 remittance (53.6% of the total transaction balance) and the smaller loan, The Oaks Mall (collateral mall in Gainesville, Florida), had an outstanding principal balance of $76.4 million (46.4% of the total transaction balance) at the May 2025 remittance. The Oaks Mall loan transferred to special servicing in October 2024 and reported paid through April 1, 2025 as of the May 2025 remittance report. The Westroads Mall loan is not in special servicing and reported current with the May 2025 remittance. The sponsor and manager of both loans is Brookfield Property Partners L.P. (Brookfield; rated BBB (low) with a Stable trend).

Both loans were granted extensions for the original October 2022 maturity dates; most recently, The Oaks defaulted on its October 2024 maturity date and the Westroads Mall maturity was extended by one year to October 2025. As of the May 2025 remittance, the transaction balance has been reduced by 36.4% since issuance. The paydown since issuance is largely the result of principal curtailments required as part of the maturity extensions granted for both loans. Morningstar DBRS considered a loan-to-value (LTV) sizing as part of the analysis, with the resulting Morningstar DBRS LTV Sizing Benchmarks supporting the credit rating confirmations for the top three classes with this review. Morningstar DBRS also considered its ultimate expectation of recoverability based on the most recent appraisal values obtained by the servicer, as of December 2024 and September 2022 for the Oaks Mall and Westroads Mall, respectively. That analysis suggested liquidated losses for The Oaks loan would erode the entirety of the Class E certificate, with losses continuing through the Class D certificate, supporting the credit rating downgrades with this review.

At the previous credit rating action in June 2024, Morningstar DBRS noted Brookfield's willingness to turn other underperforming properties back to the lender when replacement loans could not be procured, noting that the underperforming status of The Oaks property could suggest Brookfield would ultimately walk away from the asset. In October 2024, the loan transferred to special servicing and the servicer quickly noted a foreclosure was expected to be filed as a result. As of the most recently reported financials, for the trailing six months (T-6) ended June 30, 2024, the servicer reported a debt service coverage ratio (DSCR) of 1.19 times (x) for The Oaks loan, down from 1.23x at YE2023; cash flows at this property have been sustained well below issuance expectations for the last several years. Despite the relatively healthy servicer-reported DSCR of 1.40x as of YE2024 for the Westroads Mall, Morningstar DBRS expects Brookfield could have similar difficulty securing a replacement loan at the extended maturity date for that loan given the much lower implied DSCR on today's interest rates (the loan's current fixed interest rate is 4.3%) and value decline suggested by the 2022 appraisal obtained by the special servicer, as further discussed below.

The Westroads Mall loan, which is secured by the fee interests in 540,304 square feet (sf) of a 1.1 million-sf regional mall in Omaha, Nebraska, has been the stronger performer. The noncollateral anchor spaces are occupied by JCPenney, Von Maur, and First Westroads Bank, while the largest collateral anchor and junior anchors at the property include Dick's Sporting Goods and AMC Theatres. The servicer reported a YE2024 occupancy rate of 96.0% for the collateral, which includes former junior anchor Forever 21 (2.9% of NRA) that vacated prior to its scheduled lease expiration in January 2027 following bankruptcy proceedings. In the analysis for this review, Morningstar DBRS considered a Morningstar DBRS Value of $120.5 million, which was based on a 10.3% cap rate and a 2.0% haircut to the YE2024 NCF and represents a variance of -19.1% from the September 2022 appraisal value of $149.0 million and -17.6% from the initial Morningstar DBRS Value of $146.2 million. At issuance, the appraised value was $242.0 million.

The Oaks Mall loan is secured by the fee interest in 581,849 sf of a 906,349-sf super regional mall in Gainesville, Florida. The property is approximately four miles from the University of Florida's main campus and is anchored by Belk, two Dillard's stores (one of which is collateral), and JCPenney (noncollateral). JCPenney and Belk recently extended their leases by an additional five years to 2028. The mall historically drew traffic from the nearby college campus, but Butler Plaza, a 2.0 million-sf open-air shopping center, is also nearby and has become the primary retail destination for the area. As previously mentioned, an updated appraisal as of December 2024 was obtained by the servicer, reflecting an as-is value decline to $81.0 million, down from the September 2022 appraisal value of $85.0 million and the appraisal value at issuance of $227.0 million. For this credit rating action, Morningstar DBRS updated its value for the property, based on a 12.5% cap rate and the Morningstar DBRS NCF of $7.9 million, which represents a 2.0% haircut to the annualized NCF figure for the T-6 ended June 30 2024. The resulting Morningstar DBRS value of $63.5 million represents a variance of -21.7% from the December 2024 appraisal value estimate and represents an LTV of 120.4% on the outstanding loan balance as of the May 2025 remittance.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS 
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

Class X-A is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448963.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448962

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702

-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024): https://dbrs.morningstar.com/research/438283

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.