Fitch Affirms DBCCRE 2014-ARCP
KEY RATING DRIVERS
The affirmation and Stable Outlook of class A are the result of stable property performance. The year-end (YE) 2015 servicer-reported net operating income debt service coverage ratio (NOI DSCR) has improved slightly to 2.26x compared to 2.12x at issuance. The portfolio remains 100% occupied.
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 issuance portfolio value and only three states represent more than 10% of the issuance portfolio value. The properties were all acquired by the sponsor in the 18 months prior to securitization for a total acquisition cost of approximately $980.1 million (implying an all-in-loan-to-cost ratio of 63.3%).
Approximately 66% of total revenue is derived from tenants rated investment grade ('BBB?' or higher). An additional 21% of Fitch's total revenue is leased to tenants that are rated between 'B-' and 'BB+'. The remaining 13% of the portfolio is leased to nationally recognized tenants. Non-rated tenants include nationally recognized names such as Tractor Supply, Talbots and Cracker Barrel.
The loan is sponsored by ARCP. In October 2014, ARCP replaced its CEO amid controversy regarding accounting errors and financials filings in 2013 and 2014. In September 2016, federal prosecutors and the SEC announced that the former CFO and chief accounting officer will face charges related to overstating financial performance. Due to the single-purpose and bankruptcy-remote nature of the borrower structure, as well as the stable property level performance, Fitch does not expect the disruptions at the sponsor level to have an impact on this transaction.
The Outlook on class A remains Stable and no rating change is expected unless there is a material decline in property performance.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following rating:
--$345.4 million class A at 'AAAsf'; Outlook Stable.