DBRS Confirms All Classes of N-45 First CMBS Issuer Corporation, Series 2003-2

DBRS has today confirmed the Commercial Mortgage Backed Bonds, Series 2003-2, as follows:

--Class A-1 at AAA (sf)
--Class A-2 at AAA (sf)
--Class IO at AAA (sf)
--Class B at AA (high) (sf)
--Class C at AA (low) (sf)
--Class D at BBB (high) (sf)

The trend on all Classes is Stable.

The pool has experienced approximately 14.2% of collateral reduction since issuance. The two loans in the pool are cross-collateralized, but not cross-defaulted, neighbouring office properties in downtown Calgary. Both loans are scheduled to mature in November 2013. The aggregate outstanding loan balance on both properties is $318.1 million and their combined exposure on a per-square-foot basis is $147. Based on the YE2011 net cash flow, the weighted average DSCR and debt yield for the two loans is 1.85x and 18.3%, respectively. Both properties are owned and operated by Brookfield Office Properties, rated BBB (high) by DBRS.

Bankers Hall Complex is the largest loan, representing 93.7% of the current pool balance. It is secured by a Class AA office and retail property in downtown Calgary comprising twin high-rise office towers and a connecting retail concourse. According to the January 2012 rent roll, the property was 99.7% occupied with an average rental rate of $29.27 psf. Encana occupies approximately 11.9% of the NRA on several leases expiring in December 2014, and has announced a neighbouring office tower, “The Bow,” will become its headquarters. A recent servicer site inspection noted that a majority of space scheduled to roll as a result of relocation has already been re-leased to new tenants. Currently, 122,000 sf of space (6.6% of the NRA) is being marketed through the Brookfield website as available at the property. Talisman is currently the largest tenant at the property, occupying approximately 26.5% of the NRA on various leases. Talisman is also expected to take over roughly 141,800 sf, at an average rate of $32.19 psf, as various tenants vacate in the next few years.

Royal Bank Building, representing 6.3% of the current pool balance, is secured by a 24-storey Class B office building. The subject is considered a part of the Bankers Hall Complex and is named for its major tenant, Royal Bank of Canada (RBC). This tenant occupies approximately 48.4% of the NRA on various leases, none of which expire prior to the loan's scheduled maturity date. RBC’s lease rate is considered below market. The second-largest tenant, Macquarie North America Ltd., occupies 14.3% of the NRA with an average rental rate of $37.25 psf.

The confirmations reflect the continued stable performance of the loans. DBRS believes these loans are good candidates for refinance, given their healthy cash flow and debt yield, desirable location, ability to attract tenants, low leverage and strong sponsorship.

Notes:
All figures are in Canadian dollars unless otherwise noted.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (May 2011), which can be found on our website under Methodologies.