DBRS Confirms All Classes of A10 Term Asset Financing 2014-1, LLC

DBRS, Inc. (DBRS) has today confirmed the following Commercial Mortgage Pass-Through Certificates, Series 2014-1 issued by A10 Term Asset Financing 2014-1, LLC. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at A (sf)
-- Class C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)

The ratings confirmations reflect the continued performance of the pool since issuance in June 2014. The transaction consists of 18 loans secured by 30 traditional commercial real estate assets, including office, multifamily, retail and industrial properties. According to the May 2014 remittance, there has no collateral reduction to date; however, the Reserve Account has increased since issuance, improving credit enhancement to each bond class by 1.5% to 2.7%. The loans benefit from low leverage on a per-unit basis, with the weighted-average debt yield based on the most recently reported net operating income and outstanding trust balance at 7.7%, which is moderately stable, given the pool consists of stabilizing assets.

All of the collateral loans were originated by A10 Capital, LLC (A10). A10 specializes in mini-perm loans, which typically have two- to five-year terms and are used to finance properties until they are fully stabilized. The borrowers are typically new equity sponsors of fairly well-positioned assets within their respective markets. A10’s initial advance is the senior debt component typically used for the purchase of a real estate-owned acquisition or discounted payoff loans. Most loans are structured with three-year terms and include built-in extensions and future funding facilities meant to aid in property stabilization, both of which are at the lender’s sole discretion. Two loans have experienced partial principal repayment totaling approximately $1.9 million, with proceeds being used to fund the reserve account, which may be used to provide future funding to individual borrowers. The reserve account has a current balance of $4.8 million against total potential future funding obligations of $21.7 million. Once the reserve account reaches 75% of the outstanding future funding obligation total, loan repayment proceeds will be used to pay down the outstanding bonds sequentially. According to the most recent reporting, a majority of the collateral assets in the subject pool have not yet reached stabilization.

The transaction is concentrated as the largest loan in the transaction consists of a portfolio secured by 11 cross-collateralized properties and represents 12.8% of the current pool balance based on the individual properties’ fully funded loan amounts. The largest five and ten loans represent 50.0% and 80.0% of the current pool balance based on their fully funded loan amounts, respectively. None of the loans in the pool has an initial maturity date prior to December 1, 2016, and two loans, representing 5.5% of the current pool balance, has completely drawn down its future funding facility. An additional loan, representing 5.8% of the current pool balance, did not receive future funding components with their respective financings.

The ratings assigned by DBRS contemplate timely payments of distributable interest and, in the case of the Offered Notes other than the Class A-1 and A-2 Notes, ultimate recovery of Deferred Collateralized Note Interest Amounts (inclusive of interest payable thereon at the applicable rate, to the extent permitted by law). The transaction is a standard sequential pay waterfall.

Notes:
All figures are in U.S. dollars unless otherwise noted.

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

The applicable methodologies are CMBS Rating Methodology and CMBS North American Surveillance, which can be found on our website under Methodologies.