Kroll Bond Rating Agency Assigns Preliminary Ratings to DBCCRE 2014-ARCP

Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings for the DBCCRE 2014-ARCP transaction (see ratings list below). DBCCRE 2014-ARCP is a CMBS single borrower transaction that is collateralized by a $620.0 million first mortgage, 10-year, fixed rate loan that was originated by Cantor Commercial Real Estate Lending, L.P. and German American Capital Corporation on January 3, 2014. Proceeds from the mortgage loan will be used to recapitalize American Realty Capital Properties (NASDAQ: ARCP), the loan sponsor, which purchased all of the assets within the last 20 months with equity and existing unsecured credit facilities.

The loan is secured by the borrower's fee and leasehold interests in 82 single-tenant retail (37.3% of allocated loan amount), office (35.6%), and industrial (27.1%) properties comprising approximately 7.2 million sf. The properties in the collateral pool are located in 30 states and Puerto Rico, with three states representing more than 10.0% of the ALA: Illinois (15.7%), Florida (11.0%), and Massachusetts (10.2%).

The properties are fully leased to 24 tenants with a weighted average lease term of 15 years, with three tenants representing more than 10.0% of the aggregate allocated loan amount: CVS Caremark (18.3%), Aon Corporation (14.9%), and Bi-Lo, LLC (10.2%). 68.0% of the tenants, including CVS Caremark and Aon Corporation, are High Quality Credit-Worthy Tenants (HQCWTs).

KBRA's analysis of the transaction included a detailed evaluation of the resort's cash flows using our CMBS Property Evaluation Guidelines, and the application of our CMBS Single Borrower & Large Loan Rating Methodology. The results of the analysis produced an individual KNCF for each property. We applied KBRA capitalization rates to each property's KNCF to arrive at KBRA value. The analysis produced an aggregate KNCF and KBRA value of $59.4 million and $689.0 million, respectively. The resulting KLTV is 90.0%. In our analysis of the transaction, we also reviewed and considered third party engineering and environmental reports, as well as our own on-site inspections of the properties.

For further details on KBRA's analysis of the transaction, please see our Pre-Sale Report, entitled DBCCRE 2014-ARCP, which was published today at www.krollbondratings.com.

The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of final ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: DBCCRE 2014-ARCP

Class

Expected Rating

Balance (US$)

A

AAA(sf)

$345,400,000

X*

AAA(sf)

$417,390,000

B

AA-(sf)

$71,990,000

C

A-(sf)

$53,970,000

D

BBB-(sf)

$59,077,000

E

BB-(sf)

$63,733,000

F

NR

$25,830,000

*Balance represents notional amount.

17g-7 Disclosure:

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction's representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA's disclosure for this transaction can be found in the report entitled DBCCRE 2014-ARCP 17g-7 Disclosure Report.

Related publications:

CMBS Property Evaluation Guidelines, published June 10, 2011

CMBS Single Borrower & Large Loan Rating Methodology, published August 8, 2011

About Kroll Bond Rating Agency

Kroll Bond Rating Agency, Inc. (www.krollbondratings.com) is registered with the SEC as a nationally recognized statistical rating organization (NRSRO). Kroll Bond Rating Agency was established in 2010 to restore trust in credit ratings by establishing new standards for assessing risk and by offering accurate, clear, and transparent ratings.

Kroll Bond Rating Agency
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