Fitch Ratings has downgraded four and affirmed two classes of German American Capital Corp. commercial mortgage pass-through certificates series 2012-CCRE1 (COMM 2012-CCRE1).

In addition, the Rating Outlook on class B has been revised to Stable from Negative.

RATING ACTIONS

Entity / Debt

Rating

Prior

COMM 2012-CCRE1

B 12624BAG1

LT

Asf

Affirmed

Asf

C 12624BAH9

LT

BBsf

Downgrade

BBBsf

D 12624BAL0

LT

CCsf

Downgrade

CCCsf

E 12624BAN6

LT

Csf

Downgrade

CCCsf

F 12624BAQ9

LT

Csf

Downgrade

CCsf

G 12624BAS5

LT

Csf

Affirmed

Csf

Page

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VIEW ADDITIONAL RATING DETAILS

KEY RATING DRIVERS

Regional Mall Concentration; High Loss Expectations: Three specially serviced loans remain in the pool, two (93.4% of pool) secured by regional malls and one (6.6%) secured by a student housing property. Due to the concentrated nature of the pool, Fitch performed a paydown analysis that grouped these loans based on the likelihood of repayment and expected losses from the liquidation of these loans. The downgrades of classes C, D, E and F and Negative Outlook on class C reflect a greater certainty of losses based on updated servicer valuations, in addition to the reliance on proceeds from underperforming regional malls with uncertainty around timing/recovery and ultimate disposition of these loans.

The affirmation and Outlook revision to Stable from Negative on class B reflect increased/high credit enhancement (CE) and a greater certainty of recoveries based on current modeled losses.

The largest loan in the pool, Crossgates Mall (63.4%), is secured by 1.3 million sf of a 1.7 million-sf regional mall in Albany, NY. The loan, which is sponsored by Pyramid Management Group, initially transferred to special servicing in April 2020 but returned to the master servicer in June 2021 after relief was provided and the loan maturity was extended by one year through May 2023. The loan, however; re-transferred to special servicing in February 2023 due to the upcoming loan maturity.

Macy's is the remaining non-collateral anchor after Lord and Taylor closed at the end of 2020. JCPenney is the largest collateral anchor (13.9% collateral NRA through May 2023). Other larger tenants include Regal Cinemas 18, Dick's and Burlington. Collateral occupancy, excluding specialty long-term tenants, was 83.9% as of July 2022, compared with 85.4% as of December 2021, and 86.3% in December 2020. When including specialty long-term tenants, occupancy was 94.1%. Servicer-reported NOI DSCR for this amortizing loan was 1.26x at YE 2022 compared with 1.44x as of YE 2021, 0.81x at YE 2020 and 1.45x at YE 2019.

Fitch's base case loss expectation of 53% reflects a 20% cap rate and 5% stress to the YE 2022 NOI to account for the ongoing challenges with refinance/repayment of this loan.

The second largest loan, RiverTown Crossings Mall (30.0%), is secured by 635,769 sf of a 1.3 million-sf regional mall in Grandville, MI. The loan, which is sponsored by Brookfield Property Retail Group, transferred to special servicing in October 2020 and matured in June 2021 without repayment. A cash management account is trapping excess cash, and the borrower and lender are working on either modifying the debt or a deed-in-lieu/foreclosure.

The mall is anchored by three non-collateral tenants: Macy's, JCPenney and Kohl's. Non-collateral Sears closed in January 2021 and non-collateral Younkers closed in 2018. The collateral anchors are Dick's, (14.4% collateral NRA through January 2025) and Celebration Cinemas, (13.6% through December 2024). Collateral occupancy was 88% as of March 2022 compared with 86% at YE 2020 and 93% as of March 2019. Servicer-reported NOI DSCR for this amortizing loan was 1.01x at YE 2021, down from 1.51x at YE 2020 and 1.82x at YE 2019.

Fitch's base case loss expectation of 63% reflects a discount to the recent servicer provided valuation and equates to a 38% cap rate on the pre-pandemic YE 2019 NOl.

The third largest loan, Philadelphia Square (6.6%), is secured by a student housing property in Indiana, PA. The loan transferred to special servicing in March 2022 and matured without repayment in May 2022. Per servicer updates, a receiver was appointed in February 2023. The receiver is managing the property and preparing for sale. NOI DSCR was 0.78x at YE 2021. Fitch's base case loss of 58.3% reflects a discount to the recent servicer provided valuation and equates to a stressed value of $19,595 per unit.

Increase in Credit Enhancement: One loan with an $11.5 million balance paid in full post maturity since Fitch's prior rating action. As of the April 2023 distribution date, the pool's aggregate principal balance has been reduced by 83.5% to $153.8 million from $982.3 million at issuance. No loans are defeased. Cumulative interest shortfalls of $660,325 are currently affecting the non-rated class H.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

A downgrade to class B is unlikely due to sufficient CE. A downgrade to class C would occur if performance and/or valuations of the regional malls decline further or one of regional malls is disposed with greater than expected losses. Downgrades to the distressed classes D, E. F and G would occur as losses are realized from disposition of the regional malls.

Fitch has identified both a baseline and a worse-than-expected, adverse stagflation scenario based on fallout from the Russia-Ukraine war whereby growth is sharply lower amid higher inflation and interest rates; even if the adverse scenario should play out, Fitch expects virtually no impact on ratings performance, indicating very few rating or Outlook changes. However, for some transactions with concentrations in underperforming retail exposure, the ratings impact may be mild to modest, indicating some changes on sub-investment grade notes.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Upgrades are unlikely due to the regional mall concentration but could occur if performance of the regional malls improves significantly or one of the regional malls is disposed with better than expected recoveries.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

Additional information is available on www.fitchratings.com

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