DBRS Ratings GmbH (DBRS) confirmed the ratings on all classes of the Commercial Mortgage-Backed Floating Rate Notes Due May 2028 issued by Kantoor Finance 2018 DAC (the Issuer):
-- Class A Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
All trends are Stable.
The rating confirmations reflect the transaction’s overall stable performance since issuance.
Kantoor Finance 2018 DAC is the securitisation of two Dutch commercial real estate (CRE) loans: the PPF loan and the Iron loan, including the pari passu capital expenditure (capex) facility associated with the Iron loan. The loans were advanced by Goldman Sachs Bank USA and are secured against 18 assets, predominantly office properties, located in the Netherlands. The sponsor of the PPF loan is the PPF Group and the sponsor for the Iron loan is Aventicum Capital Management.
The total debt for the two loans, as of the May 2019 interest payment date, was EUR 247.0 million, with the PPF loan representing 74.7% of the total outstanding debt. The PPF loan is less leveraged, reporting a loan-to-value ratio (LTV) as of the latest May 2019 servicer report of 61.0% compared with the Iron loan, which reported an LTV of 66.0%. However, if the capex portion of the loan is included, the LTV would increase to approximately 71.1%. Both loans have seen a decrease in leverage since issuance as both loans benefit from amortisation throughout their loan terms, with the PPF and Iron loan amortising by 0.2% and 0.5% of initial principal loan amount, respectively.
The Iron loan has seen further deleveraging after the portfolio was revalued in Q4 2018 to EUR 93.9 million from EUR 88.4 million at issuance. In DBRS’s opinion, this value increase stems largely from cap rate compression as the portfolio’s gross rental income fell slightly to EUR 8.1 million as of May 2019 from EUR 8.5 million at the cut-off date. The slight decrease in revenue from the Iron portfolio can be attributed to the vacating of the tenant Chubbs Insurance, which at issuance had already given notice to vacate and contributed approximately EUR 430K to total revenue for the portfolio. A reserve equal to approximately one-year total rent was to be created if the tenant did vacate at lease expiration and according to the servicer the reserve for EUR 400K has been successfully put in place to act as collateral for the loan. DBRS did not change its underwriting assumptions.
At issuance, the Hopflein 19 asset in the PPF portfolio was completely vacant and undergoing a full refurbishment totalling EUR 16.3 million or EUR 1,200 per square metre. According to the servicer, the refurbishment was been successfully completed on time last year in September 2018. There are three tenants currently occupying the collateral with two additional tenants signed and taking occupancy as of 1 February 2020 at which time the property will be fully occupied. DBRS underwrote 44.0% of market rent for the Hopflein 19 asset at issuance and has maintained this assumption at this review; however, once the property is fully occupied, it will be credit positive in DBRS’s view.
Both loans benefit from amortisation throughout their loan term with the PPF loan amortising 1.0% in years 2 through 4 and 2.0% in year 5 with an expected maturity date in May 2023 for a total of 5.0% amortisation of the original whole loan balance. The Iron loan also amortises 1.0% in years 2 through 4 and 2.0% in year 5 with an expected maturity date in October 2022.
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 CBRE Loan Services Limited’s quarterly servicer reports.
DBRS did not rely upon third-party due diligence in order to conduct its analysis.
At the time of the initial rating, DBRS was 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 these ratings to be of satisfactory quality.
DBRS does not audit or independently verify the data or information it receives in connection with the rating process.
This is the first rating action since the Initial Rating Date.
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”):
Class A Notes Risk Sensitivity:
--10% decline in DBRS net cash flow (NCF), expected rating of Class A Notes to AA (low) (sf)
--20% decline in DBRS NCF, expected rating of Class A Notes to A (low) (sf)
Class B Notes Risk Sensitivity:
--10% decline in DBRS NCF, expected rating of Class B Notes to A (low) (sf)
--20% decline in DBRS NCF, expected rating of Class B Notes to BBB (high) (sf)
Class C Notes Risk Sensitivity:
--10% decline in DBRS NCF, expected rating of Class C Notes to BBB (sf)
--20% decline in DBRS NCF, expected rating of Class C Notes to BB (high) (sf)
Class D Notes Risk Sensitivity:
--10% decline in DBRS NCF, expected rating of Class D Notes to BB (high) (sf)
--20% decline in DBRS NCF, expected rating of Class D Notes to B (high) (sf)
Class E Notes Risk Sensitivity:
--10% decline in DBRS NCF, expected rating of Class E Notes to B (high) (sf)
--20% decline in DBRS NCF, expected rating of Class E Notes to NR (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: 13 June 2018
DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259
The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- European CMBS Rating and Surveillance Methodology
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 email@example.com.