DBRS Confirms All Classes of N-45 First CMBS Issuer Corporation, Series 2003-1

DBRS has today confirmed the following classes of N-45 First CMBS Issuer Corporation, Series 2003-1:

-- Class C at AAA (sf)
-- Class IO at AAA (sf)
-- Class D at AA (high) (sf)
-- Class E at A (high) (sf)
-- Class F at BBB (high) (sf)

The trend on all classes is Stable.

Three loans remain outstanding in this pool, as of the July 2013 remittance, representing 88.7% of collateral reduction since issuance. The ratings confirmations reflect the stable performance of the pool over time, with payoffs occurring as expected. The largest of the outstanding loans is State Street Financial Centre (81.6% of the current pool balance), which is secured by a Class A office tower in downtown Toronto that was most recently renovated in 2001. According to a June 2013 rent roll, the property was 99% occupied, and a major tenant had recently extended its lease for an additional ten years. The leverage on a psf basis is $124, and the current debt yield is 18.2%. This loan is scheduled to mature in August 2013.

The second largest loan is also being monitored for upcoming maturity. Zellers Centre (17.2% of the current pool balance) is scheduled to mature in February 2014, and is secured by a distribution centre and a three-storey office component. Previously occupied by Zellers Inc. (Zellers), it is uncertain how the space is currently being used given that the chain has effectively ceased most of its commercial operations in Canada. The property is fully leased to Zellers’ parent company, Hudson’s Bay Company, through February 2023, according to the servicer. Hudson’s Bay Company recently announced its plans to purchase Saks Inc. and open seven Saks Fifth Avenue stores and 25 Saks Fifth Avenue Off Fifth outlets in Canada. This property is located in Brampton, Ontario, with easy access to major highways and the Toronto Pearson International Airport. The loan’s leverage is considered low at $10 psf, and the current debt yield exceeds 30%.

The pending repayment of these two loans in the coming months will contribute to the full principal repayment of all DBRS-rated, non-interest-only classes. The smallest loan in the pool, secured by a single-tenant retail property, is a fully amortizing loan that is not scheduled to mature until December 2016. The outstanding balance of this loan as of July 2013 is $786,895.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the remaining loans in the pool. The July 2013 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

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

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

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