Morningstar DBRS Confirms Credit Ratings on Taurus 2018-1 IT S.R.L.

DBRS Ratings GmbH (Morningstar DBRS) took the credit rating actions on the following classes of commercial mortgage-backed security (CMBS) issued by Taurus 2018-1 IT S.R.L. (the Issuer):

-- Class A Notes confirmed at AAA (sf)
-- Class B Notes confirmed at AA (sf)
-- Class C Notes confirmed at A (sf)

The trends on all classes remain Stable.

CREDIT RATING RATIONALE
The confirmation of the credit rating on all classes reflects the transaction's stable performance over the last 12 months.

The transaction is a securitisation of one floating-rate senior commercial real estate loan, the Bel Air loan. Two loans, the Logo loan and the Camelot loan that also formed part of the original transaction, were repaid in full. The loans were advanced by Bank of America N.A. (BAML), Milan Branch (the Camelot and Bel Air loans) and BAML (the Logo loan). Financing was advanced for the acquisition of the Camelot and Bel Air portfolios and the refinancing of the Logo portfolio. As of the November 2024 interest payment date (IPD), the remaining loan, Bel Air, which is sponsored by Partners Group L.P. and managed by Kryalos Asset Management, was backed by four Italian shopping centres.

The outstanding Bel Air loan amount was EUR 56.4 million as of the November 2024 IPD, compared with EUR 110.0 million at the cut-off date in May 2018. The Bel Air loan was initially backed by a portfolio of six shopping centres. Since then, two properties were sold - the Primavera shopping centre in June 2020, and the Airone shopping centre in September 2023.

Following the restructuring executed in February 2023, the sponsor obtained the extension of the final loan maturity to February 2025. As part of the restructuring, the loan amortised 1.5% per annum (p.a.) until February 2024, and by 2.5% p.a. thereafter. For more details on the restructuring, please refer to the commentary "DBRS Morningstar Comments on Taurus 2018-1 IT S.R.L. Restructuring" at https://www.dbrsmorningstar.com/research/410358. The borrower has requested a further two-year loan and notes' maturity extension, and a noteholders meeting has been convened on 19 December 2024 to vote on the extraordinary resolution.

The loan is fully hedged with a cap strike rate of 2.25% p.a. until 15 February 2025.

The debt-yield (DY) stood at 23.8% as of the November 2024 IPD, up from 13.4% at cut-off and 21.6% at last year's review, while the loan-to-value (LTV) stood at 46.8%, up from 43.6% at last year's annual review, although it is still lower than 51.0% at origination. The loan balance stood at EUR 56.5 million, down from EUR 57.7 million at last year's review due to scheduled amortisation by an aggregate amount of EUR 1.3 million. According to the valuation report prepared by Savills Limited, the portfolio value is EUR 120.7 million as of November 2023, down 8.9% from the previous valuation at EUR 132.5 million dated November 2022. A new valuation has been mandated and is expected prior to the next IPD in 2025. The loan features LTV and DY financial covenants at 70% and 10%, respectively, and cash trap triggers at 11% DY and/or 60% LTV. The loan is current, and no breach of covenants is outstanding.

As of the November 2024 IPD, the occupancy stands at 97.7%, with a weighted average (WA) lease term of 4.4 years. The occupancy rate has been improving from 90.0% at cut-off and slightly decreasing from 99.0% at last year's review. This is reflected in a gross rental income (GRI) of EUR 15.5 million as of November 2024, unchanged from the GRI reported on the November 2023 IPD. Capital expenditures to reduce the carbon intensity of the properties are also progressing in line with the sponsor's business plan, with Building Research Establishment Environmental Assessment Methodology (BREEAM) certification obtained for one property and pre-assessment completed on the other three properties in the portfolio. The final BREEAM certification is expected in 2025.

Morningstar DBRS maintained the same assumptions as last year's review, with unchanged DBRS net cash flow (NCF) at EUR 8.6 million and cap rate at 9.0%. This resulted in a Morningstar DBRS Value of EUR 95.3 million, equivalent to 21.1% haircut over the Issuer appraised value of EUR 120.7 million.

The transaction benefits from a liquidity facility of EUR 2.96 million as of the November 2024 IPD provided by BAML, London Branch. This is available to cover interest shortfalls on the Class A and Class B Notes. Based on a WA note interest rate of 5.16%, the coverage is 15 months. Based on the Euribor cap of 5.0%, Morningstar DBRS estimates that the liquidity reserve would cover 10 months of interest payment shortfalls.

The final note maturity is in May 2032. This results in a seven-year tail period, unchanged since origination.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: European CMBS Rating and Surveillance Methodology (17 January 2024), https://dbrs.morningstar.com/research/426818.

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

Morningstar DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the surveillance section of the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/436000.

The sources of data and information used for these credit ratings include quarterly reports provided by Banca Finanziaria Internazionale SpA and CBRE Loan Services Limited since issuance.

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

At the time of the initial credit rating, Morningstar DBRS was not supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this Issuer took place on 8 December 2023 when class A notes were confirmed at AAA (sf), classes B and C notes were upgraded to AA (sf) and A (sf) from AA (low) (sf) and BBB (high) (sf) respectively, all with Stable trends; Morningstar DBRS also removed the Class B and Class C Notes from Under Review with Positive Implications, where they were placed on 13 October 2023.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com.

Sensitivity Analysis: To assess the impact of changing the transaction parameters on the credit rating, Morningstar DBRS considered the following stress scenarios as compared with the parameters used to determine the credit rating (the base case):

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

Class B Risk Sensitivity:
-- 10% decline in Morningstar DBRS NCF, expected credit rating on the Class B Notes of AA (sf)
-- 20% decline in Morningstar DBRS NCF, expected credit rating on the Class B Notes of A (sf)

Class C Risk Sensitivity:
-- 10% decline in Morningstar DBRS NCF, expected credit rating on the Class C Notes of A (low) (sf)
-- 20% decline in Morningstar DBRS NCF, expected credit rating on the Class C Notes of BBB (sf)

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Patrizia Catanese, Assistant Vice President,
Rating Committee Chair: David Lautier, Senior Vice President,
Initial Rating Date: 15 June 2018

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

-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (13 August 2024), https://dbrs.morningstar.com/research/437781

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.