DBRS Confirms Rating on Selkirk No. 3 Limited

DBRS Limited (DBRS) has today confirmed the rating on the following class of Selkirk No. 3 Trust Commercial Pass-Through Certificates (the Certificates) issued by Selkirk No. 3 Limited, as listed below:

-- Class A at AAA (sf)

The trend is Stable. Class A is privately placed pursuant to Rule 144A.

The rating confirmation reflects the strong credit enhancement of the above-noted class as subordination has continued to increase to the bonds as a result of scheduled loan amortization and the unexpected full prepayment of five loans since issuance. At issuance in September 2014, the collateral consisted of 62 seasoned, fixed-rate loans secured by 65 commercial and multifamily properties. As of the November 2015 remittance, 57 loans remain in the pool with an aggregate outstanding principal balance of $681.3 million. The top 15 loans continue to exhibit stable performance with a weighted-average debt service coverage ratio (DSCR) and debt yield of 1.84 times (x) and 16.3%, respectively, based on the most recent year-end reporting available for the individual loans. As of the November 2015 remittance, there are no loans in special servicing and no loans on the servicer’s watchlist; however, four loans in the top 15 have considerable tenant rollover risk within the next 12 months, including the sixth-largest loan in the pool, representing 4.4% of the current pool balance. DBRS accounted for the elevated vacancies in its analysis for these loans, with the sixth-largest loan in the pool highlighted below.

The 1001 Franklin Avenue loan (Prospectus ID#6, representing 4.4% of the current pool balance) is secured by an office property located in Garden City, New York. According to the December 2014 rent roll, the property was 92.1% occupied with approximately 26.6% of the net rentable area (NRA) scheduled to expire through 2016, including the second-largest tenant, Janney Montgomery Scott LLC (Janney). This tenant represents 10.8% of the NRA and has an upcoming lease maturity in June 2016. CoStar is reporting vacancy rates of 9.6% and average asking rents of $33.52 per square foot (psf) for comparable office properties in the Central Nassau submarket, which is below the subject’s average rental rate of $41.70 psf. As of December 2015, a leasing update has not been provided for the Janney tenant. DBRS will continue to maintain a dialogue with the Master Primary Servicer to track the renewal of expiring leases and the signing of new tenants at the subject. Despite the elevated risk associated with the upcoming tenant rollover, the loan benefits from experienced loan sponsors which own and operate office properties in the submarket. In addition, the sponsor’s offices are headquartered across the street from the subject, ostensibly allowing them to have an on-site presence at the property. As of YE2014 reporting, the DSCR was 1.55x compared with the DBRS underwritten DSCR of 1.31x and the property remains in overall good condition with no deferred maintenance noted, according to the April 2015 site inspection.

DBRS continues to monitor this deal on a monthly basis. For more information on this rating action, please contact us info@dbrs.com.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodologies are North American CMBS Rating Methodology (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.