DBRS Ratings GmbH (DBRS) confirmed the ratings on the Commercial Mortgage-Backed Floating-Rate Notes Due February 2027 issued by Taurus 2015-1 S.r.l. (Taurus 2015-1 IT) as follows:
-- Class A at A (high) (sf)
-- Class B at BBB (high) (sf)
-- Class C at BBB (sf)
-- Class D at BBB (low) (sf)
All trends are Stable.
The confirmations are the result of the stable performance of the Globe loan since the last review.
Taurus 2015-1 IT is a securitisation of initially three floating-rate commercial real estate loans (e.g., the Globe loan, the Calvino loan and the Fashion District loan) granted by Bank of America N.A. Milan branch to the Borrowers. At issuance, the whole loan balance was EUR 301.5 million. However, the Calvino and Fashion District loans have since repaid, in November 2017 and February 2018, respectively, reducing the loan balance to EUR 115.0 million, which was the original balance of the Globe loan at issuance.
The Globe loan was originated in November 2014 to refinance existing debt and provide financing for the purchase of three shopping malls in Northern Italy by Orion Capital Managers. The three shopping centres securing this loan are anchored by the regional hypermarket, Unicomm Srl, which provides a five-year rental guarantee.
At issuance, the three malls were 98.5% occupied and generated a total of EUR 15.1 million gross rent annually. The borrower has since carried out redevelopment work at the Vicenza and Fiume Veneto properties, aiming to refit some of the Unicomm hypermarket spaces for other retailers such as H&M and Pull & Bear. The redevelopment in the Vicenza asset also increased the lettable area to 110,756 square metres (sqm) from 108,813 sqm. Per the Q4 2018 investor report, the redevelopment work should be completed or near-completed, and the borrower is tenanting the redeveloped units. The latest reported occupancy rate was 96.3% with a gross rental income of EUR 15.1 million, slightly lower than the levels at issuance.
According to Cushman and Wakefield’s valuation from December 2017, the total market value (MV) of the portfolio increased to EUR 221.1 million from EUR 198.8 million at issuance. The increase is mainly due to the value increase from the redevelopment work. A new valuation was commissioned in December 2018, which is expected to be available soon in the investor report.
The Globe loan is interest only for the first three years; however, in years four and five, the loan may amortise by 1.5% per year if the loan-to-value ratio (LTV) is greater than 55% by the February 2019 initial payment date. However, based on the MV estimated in December 2017, the LTV has reduced to 52%, exempting the loan from annual amortisation.
The final legal maturity of the notes is in February 2027, seven years beyond the latest date of the loans maturing, including loan extensions. This is believed to be sufficient time to enforce on the loan collateral and repay bondholders, given the security structure and jurisdiction of the underlying loans.
At issuance, DBRS took the sovereign stress into consideration by adjusting the sizing parameters used in its ratings. On 13 January 2017, DBRS downgraded the Republic of Italy to BBB (high), and consequently, an additional stress was applied to the sizing parameters used in this transaction. For a more detailed discussion of the Italy rating downgrade, please refer to http://dbrs.com/research/304610.
All figures are in euros unless otherwise noted.
The principal methodology applicable to the ratings is “European CMBS Rating and Surveillance Methodology”.
DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.
A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.
Other methodologies referenced in this transaction are listed at the end of this press release.
These may be found on www.dbrs.com at http://www.dbrs.com/about/methodologies.
For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Rating Sovereign Governments” methodology at https://www.dbrs.com/research/333487/rating-sovereign-governments.
The sources of data and information used for the ratings include Zenith Service S.p.a. and Mount Street Loan Solutions LLP.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.
DBRS considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
The last rating action on this transaction took place on 13 March 2018, when DBRS removed the Negative trends on Class B, Class C and Class D, confirmed the ratings on the Class A and B notes and upgraded the ratings on the Class C and Class D notes.
The lead analyst responsibilities for this transaction have been transferred to Christopher Horst.
Information regarding DBRS ratings, including definitions, policies and methodologies, is available on www.dbrs.com.
To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the “Base Case”):
A decrease of 10% and 20% in the DBRS net cash flow (NCF), derived by looking at comparable properties, market rents, market occupancies in addition to expenses ratios, capital expenditures and re-tenanting costs, would lead to a downgrade in the transaction, as noted below for each class, respectively:
Class A Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class A at A (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class A at BBB (high) (sf)
Class B Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class B at BBB (high) (sf)
-- 20% decline in DBRS NCF, expected rating of Class B at BBB (sf)
Class C Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at BBB (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at BB (high) (sf)
Class D Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class F at BB (high) (sf)
-- 20% decline in DBRS NCF, expected rating of Class F at BB (sf)
For further information on DBRS historical default rates published by the European Securities and Markets Authority (“ESMA”) in a central repository, see http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.
Ratings assigned by DBRS Ratings GmbH are subject to EU and US regulations only.
Lead Analyst: Christopher Horst, Senior Financial Analyst
Rating Committee Chair: Christian Aufsatz, Managing Director
Initial Rating Date: 29 April 2016
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Geschäftsführer: Detlef Scholz
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The rating methodologies used in the analysis of this transaction can be found at http://www.dbrs.com/about/methodologies.
-- European CMBS Rating and Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at http://www.dbrs.com/research/278375.
For more information on this credit or on this industry, visit www.dbrs.com or contact us at firstname.lastname@example.org.