DBRS Confirms Ratings for German Residential Funding 2013-2 Limited

DBRS has today confirmed the ratings on the following classes of Commercial Real Estate Loan Backed Floating-Rate Notes due 2024 issued by German Residential Funding 2013-2 Limited:

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (high) (sf)

All trends are Stable.

The transaction consists of two fixed-rate loans and one floating-rate loan, which as of the August 2014 quarterly reporting, had a total balance of EUR 695,728,950 representing collateral reduction of 0.6 % since issuance in October 2013. The loans are cross-collateralized and cross defaulted and each was made to three borrowers, all of which are subsidiaries to the sponsor, GAGFAH S.A (GAGFAH).

As of the August 2014 reporting the collateral portfolio consisted of 22,772 residential units, 82 commercial units, 5,035 parking units and 1,129 other units, with the residential and commercial units comprising a total leasable area of 1,395,901 square metres. Since issuance, 11 units (not including own-use) have been sold from the portfolio and the net rental income for the remaining units has increased by 0.4% as of the T-12 period ending June 30, 2014. The portfolio reported physical vacancy of 5.5%, down from 5.9% reported in June 2013. Financial performance remains stable as the portfolio reported a June 2014 net operating income (NOI) of EUR 55.8 million, an increase of 2.2% compared with the YE2013 NOI and an increase of 4.1% over the DBRS underwritten NOI. The resulting projected debt service coverage ratio was 2.12 times for June 2014.

The portfolio collateral is located across over 150 communities in Germany, with the largest concentration located in Hamburg. Other notable property concentrations are situated in Hanover, Braunschweig, Gottingen and Osnabruck. GAGFAH is an experienced owner and manager of multifamily residential real estate in Germany and has of a portfolio of approximately 180,000 residential units.

Notes:
All figures are in euros unless otherwise noted.
The principal methodology applicable is: European CMBS Surveillance

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

This can be found on www.dbrs.com at:
http://www.dbrs.com/about/methodologies

For a more detailed discussion of sovereign risk impact on Structured Finance ratings, please refer to DBRS commentary “The Effect of Sovereign Risk on Securitisations in the Euro Area” on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include the Servicer, Situs.

DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This is the first rating action since the Initial Rating Date on October 7, 2013.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

A decrease of 10% and 20% in the DBRS Net Cash Flow (NCF), derived by looking at comparable properties, market rents, market occupancies in addition to expenses ratios, capital expenditures and re-tenanting costs, would lead to a downgrade in the transaction, as noted below for each class respectively:

Class A Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of AA (high) (sf)
• 20% decline in DBRS NCF, expected rating of A (high) (sf)

Class B Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of BBB (high) (sf)
• 20% decline in DBRS NCF, expected rating of BBB (low) (sf)

Class C Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of BBB (low) (sf)
• 20% decline in DBRS NCF, expected rating of BB (low) (sf)

Class D Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of BB (sf)
• 20% decline in DBRS NCF, expected rating of B (low) (sf)

Class E Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of BB (low) (sf)
• 20% decline in DBRS NCF, expected rating of CCC (sf)

Class F Notes Risk Sensitivity:
• 10% decline in DBRS NCF, expected rating of B (low) (sf)
• 20% decline in DBRS NCF, expected rating of CCC (sf)

Generally, the conditions that lead to the assignment of a Negative or Positive Trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance

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.

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

Initial Lead Analyst: Scott Goedken
Initial Rating Date: 10/7/2013
Initial Rating Committee Chair: Mary Jane Potthoff

Lead Surveillance Analyst: Roxanna Tangen
Rating Committee Chair: Erin Stafford

DBRS, Inc.
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Chicago, IL 60606
USA

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

The rating methodologies and criteria used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies