DBRS Confirms All Ratings of DECO 2015-Charlemagne S.A.

DBRS Ratings Limited (DBRS) confirmed all ratings of the Commercial Real Estate Loan Backed Floating-Rate Notes Due April 2025 (the Notes) issued by DECO 2015-Charlemagne S.A. as follows:

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

All trends are Stable.

The rating confirmation reflects the sound performance of the overall transaction as per the July 2017 interest payment date (IPD) investor report. All three of the securitised loans have reported an increase in gross rental income (GRI) as a result of new leases, reduced vacancy rates and the indexation of existing leases. All three loans have been amortising and have seen improvements in their loan-to-value and debt service coverage ratios.

The Windmill loan, which has a current securitised balance of EUR 145.1 million, increased its total GRI to EUR 25.1 million in July 2017 through robust leasing activity and rental indexations on existing leases. Additionally, in early 2017 the nine remaining properties securing the loan, eight office buildings and one shopping centre in the Netherlands, were revalued at EUR 276.8 million. This represents a 12.5% increase in the value of these nine properties since issuance.

The Mstar loan, which is secured by 19 industrial properties in the Netherlands and Germany, has a current securitised balance of EUR 82.4 million and has also seen improvements in performance. The servicer reported that GRI increased to EUR 15.8 million in July 2017, which is an increase of 26.3% since issuance. The current portfolio valuation of EUR 130.4 million dates back to June 2014; however, an updated valuation is currently being finalised and the new value is expected to be disclosed in the next reporting period.

The Pegasus loan, the third and smallest loan with a current securitised balance of EUR 53.5 million, is secured by eight office buildings in the Pegasus Business Park in Brussels, Belgium. The loan reported GRI of EUR 10.1 million in July 2017, approximately EUR 1.2 million higher than at issuance. Like the Mstar loan, a new valuation is in the process of being completed and is expected to be reported in the next quarter.

Despite the improving performance of all three securitised loans, DBRS did not receive any additional data to further analyse the underlying cashflows of the assets. DBRS has maintained its underwriting assumptions from the last review.

The transaction’s Note balance, as of July 2017, is EUR 281.0 million, which represents an 11.1% principal reduction since issuance. The Notes have been repaid through the scheduled amortisation of all three securitised loans and from the disposal of the Karperstraat property in the Windmill loan in Q4 2015. On each IPD, 50% of the Principal Distribution Amount has been allocated on a pro rata basis and 50% on a sequential basis.

The final legal maturity of the Notes is in April 2025, five years beyond the maturity of the Windmill loan in April 2020 and four-and-a-half years beyond the maturities of both the Mstar and Pegasus loans in October 2019.

DBRS continues to monitor this transaction on a quarterly basis.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: European CMBS Rating and Surveillance Methodology.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent rating action.

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

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

For a more detailed discussion of the 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 data and information used for this rating include the Servicer, Situs Asset Management Ltd. and Deutsche Bank AG, London Branch.

DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating DBRS was not supplied with third-party assessments. However, this did not impact the rating analysis.

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

DBRS does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on August 17, 2016, when DBRS confirmed the ratings of the notes issued by DECO 2015-Charlemagne S.A.

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

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

A decrease of 10% and 20% in the DBRS 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 Note Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class A at AAA (sf)
-- 20% decline in DBRS NCF, expected rating of Class A at AAA (sf)

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

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

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

Class E Note Risk Sensitivity:
-- 10% decline in DBRS NCF, expected rating of Class E at CCC (sf)
-- 20% decline in DBRS NCF, expected rating of Class E at CCC (sf)

For further information on DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Rick Shi
Rating Committee Chair: Christian Aufsatz
Initial Rating Date: 24 July 2015

DBRS Ratings Limited
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Registered in England and Wales: No. 7139960

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

-- European CMBS Rating and Surveillance Methodology
-- Legal Criteria for European Structured Finance Transactions
-- Derivative Criteria for European Structured Finance Transactions
-- Unified Interest Rate Model for European Securitisations

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375