RPT-Fitch Affirms German Residential Funding 2013-1 Limited

Mon Apr 14, 2014 9:18am EDT

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April 14 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has affirmed German Residential Funding 2013-1 Limited's (GRF 2013-1) ratings, as follows:

EUR1,235.1m class A due August 2024 (ISIN XS0944452563): affirmed at 'AAAsf'; Outlook Stable

EUR238m class B due August 2024 (ISIN XS0944452993): affirmed at 'AAsf'; Outlook Stable

EUR136m class C due August 2024 (ISIN XS0944453967): affirmed at 'Asf'; Outlook Stable

EUR272m class D due August 2024 (ISIN XS0944454858): affirmed at 'BBBsf'; Outlook Stable

EUR102m class E due August 2024 (ISIN XS0944455152): affirmed at 'BBB-sf'; Outlook Stable

KEY RATING DRIVERS

The affirmations reflect stable operating performance since the notes' issue in June 2013, reinforced by stable demand for low-risk income streams, such as that generated by well-managed German MFH (multi-family housing) assets. Residential vacancy has been stable at just above 5%, and remains in line with Fitch's expectations at closing. This is supported by continued growth of the large German cities, where around half of the assets are located.

Irrecoverable costs, a key driver of operating margins, remain at around 40% of net cold rent (rental net of recoverable items), in line with other comparable diversified MFH portfolios. Higher capital expenditure for modernisation and energy efficiency may temporarily increase the cost ratio, but investment in the maintenance of the buildings is favourable for value and occupancy over the long term.

Fitch expects investor appetite for well-managed German MFH portfolios to remain strong in 2014, following record sales volume in 2013 since the previous peak in 2007. Fitch expects the portfolio's market value will be supported over the medium term by strong interest from investors drawn by the portfolio's stable cash flows derived from a highly granular tenant base.

RATING SENSITIVITY

Any disruption in the management of the portfolio or a sharp economic decline in the regions represented in the portfolio could prompt downgrades or revisions of the Outlooks to Negative.

Fitch estimates 'Bsf' collateral proceeds of EUR2,600m.

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