DBRS Confirms Ratings of Moda 2014 S.r.l.

DBRS, Inc. (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage-Backed Floating-Rate Notes due August 2026 issued by Moda 2014 S.r.l.:

-- Class A at A (high) (sf)
-- Class B at A (sf)
-- Class C at BBB (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)

The Class X1 and Class X2 notes are not rated by DBRS. All trends are Stable.

As of the May 2015 quarterly reporting, the aggregate balance of the transaction was EUR 196,535,580, representing a collateral reduction of 0.85% since issuance.

The collateral comprises two commercial mortgage loans to Italian borrowers. The Franciacorta loan comprises 39% of the transaction and is secured on one outlet village in Brescia. The Vanguard loan comprises 61% of the transaction, and is secured by one outlet village and three shopping centres located throughout Italy. One of the shopping centres, Le Colonne, is located in Brindisi, in the economically weaker Southern Italy. Le Colonne comprises 10% of the overall transaction and approximately 16% of the Vanguard loan.

The Franciacorta loan has demonstrated strengthening performance over the past 12 months, with the Interest Coverage Ratio (ICR) improving from 2.98 times (x) to 3.22x. Vacancy at the outlet centre has increased slightly since issuance to 3.5% from 2.6%, with Q1 2015 turnover increasing by 9.14% compared with Q1 2014. Sales have grown 7.9% over the same period, the best result ever recorded at the centre. Four new units opened in the last quarter, although two are temporary lets on turnover rents.

The Vanguard loan has demonstrated mixed performance since issuance. After a decrease in ICR to 2.71x in November 2014 from 3.36x at cut-off, there has been a small improvement to 2.76x as of May 2015. While vacancies have fallen at the three shopping centres, the outlet village in Valdichiana has seen vacancy rise to 8.9% as of May 2015 from 6.3% at cut-off. Nevertheless, sales have increased marginally by 0.26% compared with Q1 2014. The shopping centre located in Southern Italy has seen footfall decrease by 2.14% versus the previous year; however, sales have increased by 12.7% year to date. New leases have been signed in the latest quarter at all three shopping centres. Although no recent leasing activity is reported at Valdichiana for the latest quarter, it has seen new leasing activity since issuance. The mixed performance of the Vanguard loan reflects the overall Italian economy, which is demonstrating a weak and patchy recovery.

There has been one updated valuation since closing for the outlet village securing the Franciacorta loan. The new valuation as of September 2014 was EUR 141.3 million compared with EUR 133.1 million as of September 2013. The gross initial yield fell to 8.3% from 8.9% and the current reported LTV is 54.7% versus 56% at issuance. The improvement in the valuation is driven both by an improvement in current rents and a tighter valuation yield.

The properties backing the Vanguard loan have not been re-valued since close.

Notes:
All figures are in euros unless otherwise noted.

The principle methodology is European CMBS Surveillance Methodology.

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 www.dbrs.com.

This rating is endorsed by DBRS, Inc. for use in the European Union.

The sources of information used for this rating include Moda 2014-1 S.R.L. and CBRE Loan Servicing Limited. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

The last rating action on this transaction took place on July 21, 2014.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios as compared with the parameters used to determine the rating (the Base Case):

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

Class A Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class A at A (low) (sf)
-- 20% decline in DBRS NCF, expected rating of Class A at BBB (sf)

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

Class C Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at BB (high) (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at B (high) (sf)

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

Class E Notes Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class C at B (high) (sf)
-- 20% decline in DBRS NCF, expected rating of Class C at B (low) (sf)