DBRS Confirms Ratings of Taurus CMBS (Pan-Europe) 2007-1 Limited

DBRS has today confirmed the ratings of Taurus CMBS (Pan-Europe) 2007-1 Limited (Taurus), as follows:

-- Class A1 at A (low) (sf)
-- Class A2 at BBB (sf)
-- Class B at BB (high) (sf)
-- Class C at B (sf)
-- Class D at CCC (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class X1 at AAA (sf)
-- Class X2 at AAA (sf)

The trends on Classes A1, A2, B, C, X1 and X2 are Stable. No trends are assigned to Classes D, E and F.

The rating confirmations reflect the expected performance of the transaction since the last DBRS rating action in June 2013. At that time, DBRS downgraded Class A1 through Class C as result of increased pool concentration and the uncertainty surrounding the ability of several loans maturing in 2014 to secure refinancing capital. While two loans have transferred to special servicing since the last review as a result of not being able to secure refinancing capital (discussed in detail later), given the conservative modeling assumptions used in the June 2013 transaction review, the rating confirmations with this review are justified.

The transaction originally consisted of one fixed-rate loan and 12 floating-rate loans secured by 57 residential and commercial properties located in Switzerland, Germany and France. The original securitised balance of the pool was €549.891 million. According to the May 2014 Remittance Report, five of the original 13 loans remain in the pool, with total collateral reduction of 60.8% since issuance. The remaining collateral consists of properties located in Germany and France as the loans secured by properties in Switzerland have been refinanced out of the pool.

As of the May 2014 Deal Summary Report, there are three loans in special servicing and one loan on the servicer’s watchlist, representing 80.0% and 17.4% of the current pool, respectively. The two recently transferred loans to special servicing are discussed below.

The Fishman JEC Portfolio loan, which accounts for 62.2% of the current pool balance, is secured by 18 office and industrial properties located throughout France. The loan transferred to special servicing in May 2014 after the borrower triggered insolvency proceedings, confirming the loan will not repay in full at the scheduled July 2014 maturity date. According to a recent RIS notification, the borrower previously traveled to London in February 2014 to discuss a possible loan extension; however, after subsequent negotiations, no agreement was reached. As of January 2014, the portfolio was 87% occupied, with 85% of the in-place net rentable income contributed by investment-grade tenants, including the French Government. Of the five largest tenants, only the fourth, which occupies 9.6% of the net rentable area (NRA) has a lease expiration in the next 1.5 years. The portfolio was last valued at €157.98 million in December 2012, equating to a loan-to-value ratio of 84.9%. At this time, DBRS is not aware of any potential disposition strategies for the loan.

The Saturn loan, which accounts for 11.0% of the current pool balance, is secured by a mixed-use property in Frankfurt, Germany, located approximately one kilometer outside the city center. The property primarily consists of retail space as well as a multifamily component, totaling 62 units. The loan transferred to special servicing in May 2014 after the loan failed to pay out of the pool at its scheduled April 2014 maturity date. The loan began to experience performance issues after the national electronics retailer, which occupied 91.0% of the NRA, vacated its space at lease expiry in December 2013. The property was last valued in January 2011 at €37.7 million; however, that valuation does not take into account the property’s current state. A new appraised value is expected shortly.

In general, the collateral securing the loans in this transaction has been subject to the overall deflation in property values in the greater European commercial real estate market. When taking the market decline into account, the capacity of debt on a loan-by-loan basis in the DBRS analysis has decreased substantially since issuance.

Note:
All figures are in euros unless otherwise noted.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The sources of information used for this rating include Taurus CMBS (PAN-EUROPE) 2007-1 LTD and Capita Asset Services (London) LTD. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.