News Column

Fitch Affirms 16 Classes of COMM 2012-CCRE2

July 17, 2014

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed 16 classes of German American Capital Corp.'sWells 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 a result of stable performance since issuance. There are no delinquent or specially serviced loans.

As of the June 2014 distribution date, the pool's aggregate principal balance has been reduced by 2.2% to $1.29 billion from $1.32 billion at issuance. No loans are defeased. There are five loans (2.79%) on the master servicer's watchlist, of those Fitch has designated two loans (0.7%) as Fitch Loans of Concern due to occupancy issues and potential tenant rollover.

The largest loan in the pool is the 1055 West 7th Street loan (8.9% of the pool), which is secured by a 615,953 square foot (sf) office building located in downtown Los Angeles, CA. The property was built in 1987 and features a subterranean parking garage. Fitch analyzed the property's operating statements and noted that operating expenses at the property were 14.6% higher than the underwritten operating expenses. The increase in operating expenses is resulting in a lower debt service coverage ratio (DSCR) than underwritten, with the year-end 2013 DSCR at 1.25x on net operating income (NOI), compared to the underwritten NOI DSCR of 1.49x. As of year-end 2013, occupancy at the property has improved to 90.3% from 85.2% at issuance.

The second largest loan in the pool is the 77 K Street loan (8.5%), which is secured by an 11-story, 326,860 sf office property located in Washington, D.C. Built in 2008. The property features an underground parking garage with 241 stalls and is in close proximity to Union Station, Washington, D.C.'s largest transportation hub. The loan is sponsored by Brookfield Properties, Inc., a wholly owned subsidiary of Brookfield Office Properties, Inc. The loan appeared on the servicer watchlist in 2013 due to a technical trigger for low DSCR; however, the loan is performing as underwritten and was removed from the watchlist in July 2013. Approximately 70% of the net rentable area (NRA) is leased by credit-rated government tenants: the Internal Revenue Service (IRS) and the Federal Retirement Thrift Investment Board (FRTIB) on long term leases. The year-end 2012 and year-end 2013 effective gross income has been lower than the underwritten amount due to rent abatements associated with those leases. The rent abatements ended in January 2013 resulting in improved cash flow performance as of year-end 2013. For that period, the property reported a 1.69x DSCR (NOI) and occupancy of 100%.

The third largest loan in the pool is 260 and 261 Madison Avenue (8.1%) which consists of two office properties totaling 923,277 sf located in midtown Manhattan in New York, NY. The properties were built in 1951 and 1953 respectively. Tenants include law firm McLaughlin & Stern (11.8% NRA, expiring 2021), Primedia (7.6% NRA, expiring 2017), and the Coca-Cola Company (5.5%, expiring 2022). The interest-only $105 million A-2 loan in this trust is pari passu with a $126 million A-1 note in COMM 2012-CR3. As of year-end 2013, the property reported a 1.82x DSCR (NOI) and occupancy of 93%.

RATING SENSITIVITY

Rating Outlooks on classes A-1 through G remain Stable due to increasing credit enhancement and continued paydown. No rating actions are expected unless there are material changes to property occupancies or cash flows. The pool has maintained performance consistent with issuance.

Initial Key Rating Drivers and Rating Sensitivity are further described in the New Issue report published on August 06, 2012.

Fitch affirms the following classes as indicated:

--$53.4 million class A-1 at 'AAAsf'; Outlook Stable;

--$94.6 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;

--$1 billion 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.

Fitch does not rate the classes X-B, PEZ and H certificates.

A comparison of the transaction's Representations, Warranties, and Enforcement (RW&E) mechanisms to those of typical RW&Es for the asset class is available in the following report:

'COMM 2012-CCRE2 -- Appendix' (Aug. 06, 2012).

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:

Structured Finance >> CMBS >> Criteria Reports

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=840289

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Valerie Jayson, +1-312-368-3116

Associate Director

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Committee Chairperson

Mary MacNeill, +1-212-908-0785

Managing Director

or

Media Relations, New York

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com


Source: Fitch Ratings


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