DBRS Assigns Provisional Ratings to PFP III 2014-1, Ltd.

DBRS has today assigned provisional ratings to the Floating Rate Notes (the Notes) to be issued by PFP III 2014-1, Ltd. The trends are Stable.

-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

Classes E and F are non-offered classes.

With respect to the deferred interest notes (Classes E and F), to the extent interest proceeds are not sufficient on a given payment date to pay accrued interest, interest will not be due and payable on the payment date and will rather be deferred. The ratings assigned by DBRS contemplate the timely payments of distributable interest and, in the case of deferred interest notes, the ultimate recovery of deferred interest (inclusive of interest payable thereon at the applicable rate, to the extent permitted by law).

The collateral for the transaction consists of a pool of 25 floating-rate mortgage loans with a $535.1 million current trust balance, secured by 26 transitional commercial and multifamily properties. Sixteen of the loans are pari passu participations with a $55.7 million (ranging from $300,000 to $9.5 million per loan) future funding component. The proceeds necessary to fulfill the future funding obligations will be drawn on primarily from a Committed Warehouse Line and will be held outside the trust, but will be pari passu with the trust participations. The future funding is generally to be used for property renovations and leasing costs, and each property has a business plan to execute that is expected to increase net cash flow. It is DBRS’s opinion that the business plans were generally achievable given market conditions, recent property performance and adequate available future funding for planned renovations and leasing costs. DBRS modeled loan-level probability of default based on in-place cash flow at each respective property, while loss severity was based on DBRS Stabilized Cash Flow. For modeling purposes, DBRS assumed that the maximum loan commitment was funded. All references to percentages of the pool in the DBRS presale report are based on the current trust amount of $535.1 million, unless stated otherwise.

One loan, Courtyard Marriott Courtyard West (2.0% of the pool), has not closed as of the publication date of the DBRS presale report, and may not close prior to closing of this securitization. If the loan does not close prior to the Closing Date, a deposit will be made to the Unused Proceeds Account in an amount equal to the expected initial principal balance of the Delayed Close Whole Loan. To the extent that any or all of the loans are not purchased within 90 days of securitization closing, the unused proceeds will pay down the notes in sequential order in an amount necessary to cause the credit enhancement of each class to equal the targeted credit enhancement, with all remaining proceeds distributed to the preferred shares. DBRS believes that the increase in subordination from the current levels to the adjusted levels appropriately accounts for the possible deterioration in both credit quality and diversity profile if the loan does not close within 90 days of securitization.

The ratings assigned to the Notes by DBRS are based exclusively on the support provided by the transaction structure and the credit underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

For more information, please refer to the DBRS presale report on the DBRS website.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology and Unified Interest Rate Model for U.S. RMBS Transactions, which can be found on our website under Methodologies.

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

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.