DBRS Finalises Ratings for DECO 2011-CSPK Commercial Mortgage-Backed Floating-Rate Notes

DBRS Ratings Limited (DBRS) has today finalised the provisional ratings for DECO 2011-CSPK Commercial Mortgage-Backed Floating-Rate Notes as follows:

– Commercial Mortgage-Backed Floating-Rate Notes, Class A at AAA (sf)
– Commercial Mortgage-Backed Floating-Rate Notes, Class B at AA (sf)
– Commercial Mortgage-Backed Floating-Rate Notes, Class C at “A” (sf)

As of the cut-off date, the collateral for the transaction consists of a single GBP 302.3 million loan (the Loan) on an office park located in West London between Central London and Heathrow Airport. Proceeds from the Loan were used by the sponsor/borrower, The Blackstone Group, to acquire the 1.16-million-square-foot office development called Chiswick Park and ancillary space.

The ratings are supported by the following strengths:
– The sponsor is experienced and a savvy real estate investor with a significant market presence in the United Kingdom and in London.
– Cash equity in the transaction is approximately GBP 116 million.
– The collateral consists of a Class A office park, with an accessible location in West London. A building in a good location will attract higher-quality tenants and retain greater value over time.
– Of the collateral, 41.2% of the rental income comes from investment-grade tenants or from tenants with parent companies having an investment-grade rating.
– Favourable structural features are in place, inclusive of a rental top-up reserve, a cash management agreement with forward-looking debt service coverage ratio (DSCR) cash flow traps and a liquidity facility.

Challenges for the ratings include the following:
– Single borrower transaction is secured by a single office development.
– Rent-free periods are common with new leases signed.
– The building is located in a non-traditional office market.
– The transaction has a significant exposure to Deutsche Bank AG, London Branch as it and its affiliates fill most of the deal’s transactional roles.

Notes:
The principal methodologies applicable are European CMBS Methodology, Legal Criteria for European Structured Finance Transactions and Unified Interest Rate Model which can be found on www.dbrs.com.

For additional information on this rating, please see European Disclosure Requirements, located at http://www.dbrs.com/research/237777.

The sources of information used for this rating include parties involved in the rating, including but not limited to Deutsche Bank AG (London Branch), The Blackstone Group and DECO 2011-CSPK. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

Lead Analyst: Scott Goedken
Rating Committee Chair: Mary Jane Potthoff
Initial Rating Date: 3 June 2011