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 rating confirmations reflect the continued stable performance of the transaction. 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 Merry Hill Shopping Centre, with approximately 1.3 million square feet (sf) of retail space. 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 collateral was owned by a joint venture between The QIC Fund (QIC) and The Westfield Group (Westfield). In May 2014, Intu Properties purchased Westfield’s 50% interest in the properties for GBP 407.7 million and installed its management team as the new property management. QIC retains its 50% interest in the collateral.

The 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, averaging between four million and five million visitors annually. The mall accounts for 82.9% of the complex gross rental income (GRI) and 84.3% of market value. The mall continues to be well occupied, at 98.3% as of the January 2014 rent roll. The centre contains approximately 300 principal leases, with a well-diversified mix of anchor and in-line tenants that serve a wide range of demographics. Since 2006, occupancy across the portfolio has been strong, ranging from 97.5% to 90.4%, and was most recently confirmed at 93% in January 2014. The property has limited tenant rollover exposure, with only 12.9% of the net rentable area rolling before loan maturity in July 2016. With the strong occupancy and rate low tenant rollover exposure, cash flow is expected to remain stable over the course of the loan term.

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

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

This credit rating has been issued outside of the European Union (EU) and is endorsed by DBRS Ratings Limited. It may be used for regulatory purposes by financial institutions in the EU.