DBRS Confirms Ratings of DECO 2012-MHILL Limited

DBRS has today confirmed the ratings of DECO 2012-MHILL Limited Commercial Mortgage-Backed Floating-Rate Notes as follows:

-- Class A at AAA(sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)

All trends are Stable.

The collateral for the transaction consists of a GBP 210 million interest-only loan on the Merry Hill portfolio of properties located in the town of Brierley Hill in the West Midlands, approximately eight miles west of the Birmingham city centre. The Merry Hill portfolio is highlighted by the Westfield Merry Hill Shopping Centre, with approximately 1.3 million square feet (sf) of retail space. The Westfield Merry Hill Shopping Centre is a prime retail asset and is one of the most attractive and best-performing shopping centres in the United Kingdom. At issuance, the mall accounted for 82.3% of the complex gross rental income (GRI) and 84.3% of market value. Additionally, the portfolio includes a number of ancillary properties including a retail park, a business park, a leisure complex, a free-standing supermarket, an industrial estate, a trade counter park, a petrol station and approximately 47 acres of development ground. At issuance, the proceeds from the loan were used to refinance the borrowers/sponsors acquisition loan, which was securitized in DECO 12-UK4. The QIC Fund acquired a 50% interest in the properties at a purchase price of GBP 524 million.

At issuance, the property was 94.9% occupied with 294 principal leases at the centre with a well-diversified mix of anchor and in-line tenants that serve a wide range of demographics. The property continues to display strong occupancy as of the January 2013 rent roll, with an occupancy rate of 97.5%. Since 2006, occupancy across the portfolio has been strong, ranging from 97.5% to 90.4%. The property has limited tenant rollover exposure, with only 12.9% of the net rentable area (NRA) rolling before loan maturity in July 2016. With the increase in occupancy and low tenant rollover exposure, cash flow should remain stable over the course of the loan term. DBRS has confirmed the ratings as initially assigned to the transaction based on the stable performance of the loan.

Notes:
All figures are in U.K. pounds sterling unless otherwise noted.

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

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

The sources of information used for this rating include DECO 2012-MHILL Limited, Deutsche Bank AG, and Situs Asset Management. DBRS considers the information that was available for the purposes of providing this rating was of satisfactory quality.

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

Initial Lead Analyst: Scott Goedken
Initial Rating Date: 1/02/2012
Rating Committee Chair: Mary Jane Potthoff

Lead Surveillance Analyst: Scott Goedken
Rating Committee Chair: Erin Stafford