Fitch Affirms Gallerie 2013 S.r.l Notes
EUR266.3m class A due November 2025 (ISIN IT0004979198): affirmed at 'Asf'; Outlook Stable
EUR49.1m class B due November 2025 (ISIN IT0004980527): affirmed at 'A-sf'; Outlook Stable
EUR41.3m class C due November 2025 (ISIN IT0004980527): affirmed at 'BBB-sf'; Outlook Stable
The transaction is a securitisation of a EUR363m commercial mortgage loan previously granted by Goldman Sachs International Bank (GS) to an Italian closed-ended real estate fund (Krypton) to enable it to acquire 13 shopping centres and two retail parks located across Italy.
KEY RATING DRIVERS
The affirmation reflects the stable performance of the loan since closing in December 2013. Since closing, the loan-to-value of the transaction decreased to 55.8% from 58% due to scheduled amortisation of 1% per annum and a positive revaluation of the collateral by 0.5% in December 2014. Consumer confidence has strengthened as have retail sales for both food and non-food retailers (according to ISTAT).
Although footfall across the portfolio has fallen (4.3% yoy in 2H15), total turnover has risen 5.6%. Fitch views the performance of the collateral as satisfactory despite a slight increase in vacancy to 5.5% from 4.7% at closing. The property portfolio benefits from a granular and diverse income profile, with no single tenant accounting for more than 4.5% of total passing rent. The top 15 tenants provide 33.8% of total passing rent with a weighted average lease term to break of 1.5 years (0.4 years as at the last rating action).
All the shopping centres benefit from an adjoining hypermarket area owned and operated by Gallerie Commerciali Italiane (GCI), a fully-owned Italian subsidiary of the French conglomerate, Auchan SA. While these grocery areas are not part of the collateral securing the loan, they represent a significant driver of footfall. Weaker revenues for Auchan in 2014 were one of the negative rating factors in our review.
Negative rating action may result from a deterioration of the retail outlook in Italy or macroeconomic shocks, including sovereign downgrades, a further weakening of Auchan's trading or a withdrawal of Auchan from Italy.
Fitch estimates 'Bsf' proceeds of EUR474m.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.
Fitch did not undertake a review of the information provided about the underlying asset pool ahead of the transaction's initial closing. The subsequent performance of the transaction over the last 12 months is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
-Loan-by-loan data provided by CBRE Loan Servicing Limited as at 7 August 2015
-Transaction reporting provided by CBRE Loan Servicing Limited as at 7 August 2015
REPRESENTATIONS AND WARRANTIES
A comparison of the transaction's Representations, Warranties & Enforcement Mechanisms to those typical for the asset class is available by accessing the appendix that accompanies the initial new issue report (see Gallerie 2013 S.R.L. Appendix, dated 06/12/2013 at www.fitchratings.com). In addition refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 12 June 2015 available on the Fitch website.