CHICAGO--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on DBCCRE 2014-ARCP Mortgage Trust Commercial Mortgage Pass-Through Certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
-$345,400,000 class A 'AAAsf'; Outlook Stable.
The following classes are not expected to be rated:
--$417,390,000* class X;
--$71,990,000 class B;
--$53,970,000 class C;
--$59,077,000 class D;
--$63,733,000 class E;
--$25,830,000 class F.
* Notional and interest-only.
The expected ratings are based upon information received by the issuer as of Jan. 8, 2014.
The DBCCRE 2014-ARCP Mortgage Trust Commercial Mortgage Pass-Through Certificates represent the beneficial interest in a trust that holds a 10-year, fixed-rate, interest-only $620 million mortgage loan secured by the fee and leasehold interests in 82 office, retail, and industrial properties with a total of 7.2 million sf located in 30 states and Puerto Rico. Proceeds from the loan were used to recapitalize the portfolio as the sponsor, American Realty Capital Properties, Inc. (ARCP), purchased all of the collateral assets within the last 18 months using cash equity and existing unsecured credit facilities. The certificates will follow a sequential-pay structure.
KEY RATING DRIVERS
Moderately Leveraged Transaction: The loan has a Fitch stressed DSCR and LTV of 1.05x and 86.6%, respectively. The properties were all acquired by the sponsor over the past 18 months at a total acquisition cost of approximately $980.1 million (implying an all-in loan-to-cost ratio of 63.3 %).
Diverse and Granular Pool: The loan is secured by 82 commercial properties including 68 retail, nine office and five industrial assets. The properties are located in 30 states and Puerto Rico and are occupied by 24 distinct tenants in 14 different industries. No state represents more than 16.5% of total portfolio value and only three states represent more than 10% of the total portfolio value.
Tenant Credit Quality: 66.3% of Fitch's total revenue is leased to tenants rated investment grade ('BBB-' or higher). An additional 20.8% of Fitch's total revenue is leased to tenants that are rated between 'B-' and 'BB+'. The remaining 12.9% of the portfolio is leased to nationally recognized tenants. Nonrated tenants include nationally recognized names such as Tractor Supply, Talbots, and Cracker Barrel.
Experienced Sponsorship: The loan is sponsored by ARCP. ARCP purchased all of the portfolio assets within the last 18 months using equity and existing unsecured credit facilities. As of Sept. 30, 2013 ARCP owned 1,219 properties leased to 183 tenants in 32 distinct industries. ARCP's portfolio is 100% occupied and the weighted average lease duration is 9.5 years. Investment grade tenants represented 41.1% of the company's rent roll.
Fitch found that the pool could withstand a 64.2% decline in value (based on appraised values at issuance) and an approximately 55.0% decrease to the 2014 contractual cash flow prior to experiencing $1 of loss to the 'AAAsf' rated class.
Fitch evaluated the sensitivity of the ratings of class A (rated 'AAAsf' by Fitch) and found that an 8% decline in Fitch net cash flow would result in a one-category downgrade, while a 35% decline would result in a downgrade to below investment grade. The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com' or by clicking on the link.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 2013);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (September 2013);
--Counterparty Criteria for Structured Finance Transactions and Covered Bonds (May 2013);
--U.S. Commercial Mortgage Servicer Rating Criteria, (February 2011);
--U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (December 2013).
Applicable Criteria and Related Research: DBCCRE 2014-ARCP (US CMBS)
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
U.S. Commercial Mortgage Servicer Rating Criteria
Counterparty Criteria for Structured Finance and Covered Bonds
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions
Global Structured Finance Rating Criteria