DBRS Confirms Five Classes and Downgrades Four of Taurus CMBS (Pan-Europe) 2007-1 Limited

DBRS has today downgraded the following ratings of Taurus CMBS (Pan-Europe) 2007-1 Limited (Taurus):

-- Class A1 to AA (sf) from AAA (sf)
-- Class A2 to A (sf) from AAA (sf)
-- Class B to BBB (sf) from AA (sf)
-- Class C to BB (sf) from A (sf)

Classes B and C have been removed from Under Review with Negative Implications, where they were placed on November 18, 2009. In addition, DBRS has confirmed the ratings of the following five classes of Taurus:

-- Class X1 at AAA (sf)
-- Class X2 at AAA (sf)
-- Class D at CCC (sf)
-- Class E at C (sf)
-- Class F at C (sf)

The trends on Classes A1, A2, B, C, X1 and X2 are Stable. No trends are assigned to Classes D, E and F.

This transaction originally consisted of one fixed-rate loan and 12 floating-rate loans secured by 57 residential and commercial properties located in Switzerland, Germany and France. The original securitised balance of the pool was €549,891,408. According to the most recent servicer report, the current securitised balance of the pool is €395,632,973. The pool now consists of nine loans backed by 48 properties.

There are no loans in special servicing; however, four loans have been placed on the servicer’s watchlist because of their upcoming maturity dates.

The largest loan on the servicer’s watchlist is the Galeries Lafayette loan (17.1% of the current pool balance), which is secured by a landmark department store in Berlin, Germany. The property is anchored by the French retailer, Galeries Lafayette. This loan was scheduled to mature in January 2012 and, at that time, the borrower and the servicer agreed upon a three-month extension of the maturity date to give the borrower additional time to sell the asset and repay the loan in full. The loan’s extended maturity date is April 30, 2012. According to the servicer, the borrower has submitted evidence that a full repayment of the loan is likely at the April 30, 2012, maturity date. However, the DBRS capacity of debt analysis assumes a loan-to-value (LTV) ratio that would imply a 36.7% decline to the most recent appraised value.

The next largest loan on the servicer’s watchlist is Saturn, and is secured by a single property located approximately one kilometre from the centre of Frankfurt, Germany. This loan represents 7.1% of the current pool balance. As of the most recent servicer report, the property is approximately 90% occupied and used primarily for retail purposes. The main retailer’s lease runs through December 2013. The loan was added to the servicer’s watchlist to be monitored as its maturity date approaches in April 2012. According to the servicer, they are currently in discussions with the borrower regarding the loan repayment. A January 2011 valuation report implied a securitised LTV of 74.8%. The most recent DBRS analysis is based on the LTV as implied by the January 2012 valuation report.

In general, the collateral securing the loans in this transaction have been subject to the overall deflation in property values in the greater European commercial real estate market. When taking the market decline into account, the capacity of debt, on a loan-by-loan basis, in the DBRS analysis, has decreased substantially since issuance. As a result, DBRS has downgraded certain classes as listed above.

Note:
All figures are in Euros unless otherwise noted.

The applicable methodologies are European CMBS Rating Methodology, CMBS European Surveillance Methodology, Legal Criteria for European Structured Finance Transactions, Unified Interest Rate Model, Swap Criteria for European Structured Finance Transactions