DBRS Confirms All Classes of A10 Term Asset Financing 2017-1, LLC

DBRS Limited (DBRS) confirmed the ratings of A10 Term Asset Financing 2017-1, LLC as follows:

-- Class A-1-FL at AAA (sf)
-- Class A-1-FX at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at A (low) (sf)
-- Class C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the underlying loans within the pool.

The transaction consists of 30 loans secured by 52 transitional commercial real estate assets, including office, retail, industrial and multifamily properties. A total of 28 underlying loans are cross-collateralized and cross-defaulted within five separate portfolios. According to the July 2018 remittance, there has been a collateral reduction of 20.7% since issuance, as seven loans have been repaid in full, contributing to a principal paydown of $64.9 million. The remaining loans benefit from low leverage on a per-unit basis, with the weighted-average debt yield based on the most recently reported net operating income and outstanding trust balance at 8.7%, which is considered healthy given that the pool consists of stabilizing assets.

Most loans are structured with two- to four-year terms and include built-in extensions and future funding facilities available as the properties move toward stabilization. Both the extensions and future fundings are at the lender’s sole discretion. The reserve account established for future funding obligations has a current balance of $13.5 million, with a remaining future funding option of $28.5 million. According to the most recent reporting, the collateral assets generally have stable debt yields; however, the majority of the properties continue to be in the process of stabilization. Details on the stabilization status for pivotal loans within the pool are provided in the Loan Commentary on the DBRS Viewpoint platform, as discussed below.

The ratings assigned by DBRS contemplate timely payments of distributable interest and, in the case of the offered notes other than the Class A Notes, ultimate recovery of deferred collateralized note interest amounts (inclusive of interest payable thereon at the applicable rate, to the extent permitted by law). The transaction is a standard sequential-pay waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

• Menlo Rite-Aid
• Vernon

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire commercial mortgage-backed security (CMBS) universe, as well as deal and loan-level commentary for all DBRS rated transactions.

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

The principal methodologyis CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.