DBRS Confirms Ratings of Westfield Stratford City PLC

DBRS Ratings Limited (DBRS) has today confirmed its rating on the following class of Commercial Mortgage-Backed Floating-Rate Notes Due November 2024 issued by Westfield Stratford City Finance PLC:

-- Class A at AAA (sf)

The trend is Stable.

The rating confirmation reflects the overall stable performance of the transaction since issuance.

The single loan is secured by the 1.9 million square feet Westfield Stratford City shopping centre and the 5,000 space adjacent car park. The property is located in East London within the Queen Elizabeth Olympic Park neighbourhood.

The single loan is a fixed-rate loan with a five-year loan term, maturing in 2019, and has an outstanding principal balance of GBP 750.0 million. The purpose of the loan was to provide refinancing of existing indebtedness of the borrower, to pay refinancing and transaction costs and to provide funding for general corporate purposes of the borrower.

According to the August 2015 Investor Report, the Net Operating Income (NOI) increased 5.6% to GBP 86,664,915 compared with GBP 82,031,176 at issuance. As a result of the improvement in performance, the interest coverage ratio was 4.18 times. Although the total individual tenant count has decreased by 12 units to 315 since issuance, the physical occupancy rate at the property has increased to 96.0%, up 1% since issuance as most of the departed tenants occupied minor kiosk and specialty units at the property. The shopping centre continues to exhibit a well-diversified income stream as 18.08% of rental income is generated by the top ten tenants and the largest tenant accounts for 2.86% of the total base rent. The property’s largest tenants are John Lewis, Waitrose and Marks & Spencer.

Through the following 12 months, tenants providing 6.9% of the total rental income have lease expirations and tenants providing an additional 9.5% of total rental income also have lease break options during this term. Across all tenants at the property, the weighted-average lease term to maturity and weighted-average lease term to break is 10.18 years and 5.81 years, respectively.

The subject was last valued at GBP 1.96 billion in May 2014, indicative of a strong loan-to-value (LTV) ratio of 38.4%. As the subject continues to be one of the most highly trafficked and popular shopping centres in the United Kingdom, DBRS expects future performance to continue to be stable.

Notes:
All figures are in GBP unless otherwise noted.

The principle methodology is European CMBS Surveillance Methodology.

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

Other methodologies referenced in this transaction are listed at the end of this press release. This may be found on www.dbrs.com at http://www.dbrs.com/about/methodologies

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary 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 (UK) Limited

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS does not rely upon third-party due diligence in order to conduct its analysis; however, Agreed Upon Procedures (AUP) are included in the requested documentation.

DBRS was not supplied with AUP documents. Data checks were performed and DBRS did apply additional cash flow stresses in its scenarios.

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

This is the first rating action since the Initial Rating Date.

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.

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

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

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 the Class A Notes:

Class A Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class A at AA (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class A at BBB (sf)

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

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Initial Lead Analyst: Scott Goedken, Senior Vice President, Global CMBS
Initial Rating Date: 8 October 2014
Initial Rating Committee Chair: Erin Stafford, Managing Director, Global CMBS

Lead Surveillance Analyst: Jorge Lopez, Financial Analyst, Global CMBS

Rating Committee Chair: Mary Jane Potthoff, Managing Director, Global CMBS

DBRS Ratings Limited
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United Kingdom
Registered in England and Wales: No. 7139960

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

-- European CMBS Surveillance
-- European CMBS Rating Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375