DBRS Confirms Ratings for Taurus 2013 (GMF 1) PLC

DBRS Ratings Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Real Estate Loan Backed Floating-Rate Notes due May 2024 issued by Taurus 2013 (GMF1) PLC:

-- 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)
-- Deferred Arrangement Certificates at A (sf)

All trends are Stable.

The transaction consists of two fixed-rate loans and two floating-rate loans, which as of the February 2016 quarterly reporting, had a total balance of EUR 1,029 million, representing a collateral reduction of 4.5% since issuance in May 2013. The loans are cross-collateralised and cross-defaulted, and each has its own borrower and guarantor, all an affiliate of the original sponsor, GAGFAH S.A. (GAGFAH).

At the beginning of 2015, Germany’s Deutsche Annington and GAGFAH merged, creating Vonovia SE (Vonovia), which became Europe’s second-largest real estate company. Nothing on this transaction has changed due to this merger. DBRS’s view of the strong sponsorship has not changed as a result of this merger.

As of February 2016, the collateral portfolio consisted of 36,344 residential units, 790 commercial units, 5,569 parking units and 1,811 other units, with the residential and commercial units comprising a total leasable area of 2,139,040 square metres. Since YE2013, 637 units have been sold. The portfolio collateral is primarily located in Greater Dresden, Germany, accounting over 98.0% of the total lettable area and 98.3% of the total income in the portfolio.

The portfolio reported financial vacancy of 4.0%, down from 5.0% at issuance. The portfolio reported YE2015 cash flow of EUR 85.1 million, a decrease of 10.1% compared with YE2014 figures. The drop resulted from the EUR 18.8 million increase in capital expenditures, compared to YE2014 figures, which was used to refurbish properties across the portfolio. In spite of the net cash flow (NCF) decrease, reported net rental income and net operating income have surged by 7.2% and 12.4%, respectively, since issuance. The resulting YE2015 debt service coverage ratio was 1.84 times (x). As of February 2016, the portfolio was valued at EUR 1.80 billion, a 3.7% increase compared with the EUR 1.78 billion YE2014 valuation.

The final legal maturity of the Notes is in May 2024, six years beyond the maturity of the loans.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable is: European CMBS Surveillance.

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 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, Situs Asset Management Limited.

DBRS was not supplied with third party assessments. However, this did not impact the rating analysis.

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

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.

The last rating action on this transaction took place on 6 May 2015 when DBRS confirmed the ratings.

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

To assess the impact of the 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 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 the following ratings in the transaction, as noted below for each class respectively:

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

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

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

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

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

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are generally resolved within a 12-month period. DBRS’s outlooks and ratings are monitored.

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, EU CMBS
Initial Rating Date: 16 May 2013
Initial Rating Committee Chair: Mary Jane Potthoff, Managing Director, Global CMBS

Lead Surveillance Analyst: Jorge Lopez Herguido, Financial Analyst, Global CMBS
Rating Committee Chair: Erin Stafford, Managing Director, Global CMBS

DBRS Ratings Limited
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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.