DBRS Confirms Ratings for German Residential Funding 2013-1 Limited

DBRS, Inc. (DBRS) has today confirmed the ratings on the following classes of Commercial Real Estate Loan Backed Floating-Rate Notes due 2024 issued by German Residential Funding 2013-1 Limited:

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

All trends are Stable.

As of the May 2015 quarterly reporting, the transaction had a total balance of EUR 1,979,306,566.30, representing collateral reduction of 5.9% since issuance in June 2013. The loans are cross collateralized and cross defaulted, and each was made to two borrowers, both of which are subsidiaries to the sponsor, GAGFAH S.A. (GAGFAH).

As of the March 2015 e-IRP reporting, the collateral portfolio consisted of 58,630 residential units, 494 commercial units, 11,466 parking units, one senior unit and 1,343 other units, with the residential and commercial units comprising a total leasable area of 3,697,523 square metres. Since issuance, 3,039 residential units have been sold, 27 commercial units have been sold and 654 parking units have been sold. The portfolio reported physical vacancy of 3.0%, down from 4.2% a year prior. Financial performance remains stable as the portfolio reported a March 2015 trailing 12 months net operating income (NOI) of EUR 186.0 million, an increase of 22.5% over the annualized NOI used for the last DBRS rating action. Based on the March 31, 2015, e-IRP reporting the interest coverage ratio and debt service coverage ratio were reported at 2.35 times (x) and 2.04x, respectively. At issuance, senior subsidised debt in the amount of EUR 247.0 million was permitted to be secured by the portfolio properties; however, this debt was not securitised in the trust. As of March 31, 2015, this debt balance had been reduced to EUR 209.0 million.

The portfolio collateral is located across over 100 communities in Germany, with the largest concentration located in Berlin. Other notable property concentrations are situated in Hamburg, Cologne, Bielefeld and Essen. GAGFAH is an experienced owner and manager of multifamily residential real estate in Germany and has of a portfolio of approximately 180,000 residential units.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is European CMBS Surveillance, which can be found on www.dbrs.com at http://www.dbrs.com/about/methodologies

Other methodologies and criteria referenced in this transaction are listed at the end of this press release.

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/.

The sources of information used for this rating include the Servicer, Capita Asset Services (Ireland) Limited.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This is the second rating action since the Initial Rating Date on June 20, 2013.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

A decrease of 10% and 20% in the DBRS Net Cash Flow (NCF), derived by looking at comparable properties, market rents, market occupancies in addition to expenses ratios, capital expenditures and re-tenanting costs, would lead to a downgrade in the transaction as noted below for each class respectively:

Class A Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of AAA (sf)
• 20% decline in DBRS NCF, expected rating of AA (high) (sf)

Class B Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of A (sf)
• 20% decline in DBRS NCF, expected rating of BB (sf)

Class C Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of BB (high) (sf)
• 20% decline in DBRS NCF, expected rating of B (high) (sf)

Class D Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of BB (sf)
• 20% decline in DBRS NCF, expected rating of B (sf)

Class E Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of BB (low) (sf)
• 20% decline in DBRS NCF, expected rating of B (low) (sf)

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS’s outlooks and ratings are under regular surveillance.

For further information on DBRS historic default rates published by the European Securities and Markets Administration in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

This credit rating has been issued outside the European Union (EU) and is endorsed by DBRS Ratings Limited. It may be used for regulatory purposes by financial institutions in the EU.

Initial Lead Analyst: Scott Goedken
Initial Rating Date: 20 June 2013
Initial Rating Committee Chair: Mary Jane Potthoff

Lead Surveillance Analyst: Chase Purdom
Rating Committee Chair: Erin Stafford

DBRS, Inc.
333 West Wacker Drive, Suite 1800
Chicago, IL 60606
USA

The applicable methodologies are European CMBS Rating Methodology, European CMBS Surveillance, Legal Criteria for European Structured Finance Transactions and Unified Interest Rate Model for European Securitisations, which can be found on our website under Methodologies.

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

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

DBRS’s rating definitions and the terms of use of such ratings are available at www.dbrs.com.