QUARTERLY REPORT Reporting Period: 4Q2016

Transcription

1 QUARTERLY REPORT Reporting Period: 4Q2016 Deco 8 UK Conduit 2 plc. (Deal ticker: Deco 8 - C2X)

2 Coverage Coverage Securitisation Name Reporting Period: 3Q2 Report Date IPD Date 20/10/2016 Loan as % of Total Pool 69.98% Contact Details Primary Servicer Special Servicer Note Trustee Situs Solutus Advisors Ltd Deutsche Trustee Company Ltd Dan Boakes James Bannister Hannah Ward +44 (0) (0) (0) cmbsinvestors@situs.com saspecial@solutus.co.uk SNAPSHOT OF KEY UPDATES The re-financing of the portfolio continues to be pursued, however the feedback from possible new lenders since UK decision to leave the EU has caused some lenders to prefer to wait for a period of time, to assess any impact, and the magnitude of such, on property values. Solutus instructed a 3rd party Valuer/Agent to provide an updated opinion of where the value sits today. This was advised at a range of 176m - 184m gross. Even though the decision to leave the EU has delayed matters, it is still the intention to pursue a refinance or sale of the portfolio on completion of remaining asset management initiatives which are likely to maximise the value of the portfolio and recoveries under the Loan; In the meantime the Borrower has submitted a 12/18 month standstill/restructuring plan which is currently being consideredby the Special Servicer; A new lease has completed on the whole of Stirling House on a 10 year lease; Lease renewals on Tri Centre 1 and Tri Centre 2, Swindon, have completed for a term of 10 years. The tenant has vacated Tri Centre 3. Loan Information Property Information Loan Work Out Summary Origination Date 13/02/2006 Location Various Date of Transfer Maturity Date 20/04/2016 Type Office Reason for Transfer Interest Type 3-m LIBOR Number of Assets 16 Standstill Agreement Current All-in Interest Rate 1.38% Number of Leases 42 Recovery Type Origination Whole Loan Balance 208,556,250 WARLT (years)* 5.87 Administration Origination Senior Loan Balance 208,556,250 Net Lettable Area** 1,173,790 LPA Receivership Origination Junior Loan Balance 0 Current Value (OMV) 191,442,500 Appraisal Reduction? Current Whole Loan Balance 189,169,392 Current Value (VPV) TBD If (Y), Reduction Amount Current Senior Loan Balance 189,169,392 Date of Valuation 27/02/2015 Swap in Place Current Junior Loan Balance 0 NOI 9,149, Indicative Unwind Cost Loan Status Matured/Defaulted * WARLT = Weighted Average Remaining Lease Term 25/10/2012 LTV Breach Asset Mgmt and Sale or Refinance No 5,272,957 No N/A Covenant Information ** The Net Lettable area has changed from 1,174,706 sqft due to the subdivision of Tri Centre 3 and combination of units at Oak House Origination Previous Quarter Current Quarter ICR (annual projected) - > 1.25x 1.77x 3.33x 3.52x DSCR N/A 1.77x 3.33x 3.52x LTV - < % 98.81% Comment 4.00x ICR History 4.00x DSCR History 1 LTV History 3.00x 2.00x 1.00x 3.00x 2.00x 1.00x 0.00x 0.00x

3 % of Total Area Property Address: Various - see footer Property Strats Title Occupancy by Area Reserves Economic Vacancy* Top Five Tenants Microsoft Ltd Zurich Assurance Ltd The Post Office American Express Services Europe Ltd Secretary of State for Communities 14 Freehold / 2 long LH 81.17% 272, % * based on ERV's, or passing rent where ERV not available. Increase due to reallignment of ERV's and Tri Centre renewal. 41.4% 17.5% % 3. Lease Expiry Profile RENT AREA Occupancy History 4Q2015 Top 5 Tenants as % of Total: 76% Region Distribution East Midlands Valuation Information OMV / VPV (in millions) Valuer Net Initial Yield Reversionary Yield Equivalent Yield Costs of Sale as % of Purchase Price Date of Next Valuation 191.4m/TBD C&W 6.55% Various 7.19% 5.75% TBC Special Assumptions: Property valued at 191,442,500 with a potential premium if sold as a Portfolio. 28% 3% 6% 4% 12% 2% 4% 3% 2% 36% East Anglia Greater London North-West Scotland South-East South-West Wales West Midlands Yorks & Humberside Oak House, Watford, WD24 4QP - Tri Centre, Swindon, SN1 1HN - Rowland House, Chesterfield, S49 1HQ - Orchard House, Blackburn, BB1 6HA - York House, Leicester, LE1 6FB - Sussex House, Burgess Hill, RH15 9AQ - Verney House, Aylesbury, HP19 8ET - Wellington House, Barnsley, S70 1WA - Southgate House, Gloucester, GL1 1DL - Friars House, Coventry, CV1 2TE - 21 Farncombe Road, Worthing, BN11 2BW - Hyde Park House, Ipswich, IP1 3LG - Stirling House, Clydebank, G81 2NT - Microsoft Buildings 1/3 & cps, Reading, RG6 1WG - Premier House, Reading, RG1 7EB - Gwent Consultancy Office, Cwmbran, NP44 3HR

4 Work Out History and Strategy Date of last Servicer site visit: Sep 14 (various dates) Date of last Borrower meeting: 31st October 2012 History: Solutus Advisors appointed end of October 2012, following the loan-to-value (LTV) event of default called by the primary servicer; By market value, we had anticipated initially 65% of asset sales over 2014, with the remaining 35% sold prior to loan maturity (April 2016) in line with the completion of value-add initiatives. However, this was reviewed and revised based upon advice and an asset management program was pursued; Following the new Valuation, there remains one final ongoing matter to conclude in respect of historic liabilities on the Mapeley Beta Companies, which would remove circa 14m of liabilities and enable the assets along with the corporate structure to be potentially sold as one; There is currently a capex program in place across all assets to increase letability of the vacant units; New lettings and heads of terms continue to be negotiated in respect of Friars House, Oak House, and Southgate House. Please see over page for progress this quarter. Interest Payment Date Waterfall Income Gross Rent 2,693, Service Charge 247, Insurance 18, Other - 2,958, Outgoings Management Fees 198, Administration Fees - Receiver Fees 123, Property Non Recoverables* 1,209, Service Charge Costs 573, Insurance 18, Third Party Costs - 2,122, Head Rent Net Income 836, * Includes property repairs and maintenance, utility charges and vacant unit business rates. Historic set up costs have also been recovered this quarter.

5 Asset Management and Disposal Strategy Asset-by-asset (updated where applicable) Microsoft Building, Reading No further update at present. Rowland House, Chesterfield The current lease expires in November The Regear is currently being negotiated. Sussex House, Burgess Hill New lease concluded with the sole tenant for ten years. This is on a stepped rent, with a tenant CAPEX plan which has been executed. Southgate House, Gloucester Works have completed on the new reception area, which has significantly improved the entrance of the building. The aim is to increase occupancy levels, stabilise income, and a subsequent marketing for sale will then be undertaken. A new 8 year lease has completed to Pro Insurance Solutions Limited for an additional 9,849 sqft of space on the 2nd floor, which includes 19 car parking spaces. Tri Centre, Swindon The lease renewals on Tri Centre 1 and 2 have completed both for a term of 10 years. An asset management plan for Tri Centre 3 is being put in place. Premier House, Reading The refurbishment works being undertaken by The Secretary of State as a requirement of their lease have been completed. A review of the asset strategy is being undertaken. Farncombe Road, Worthing The current tenants UK retail banking operations are under review. Further negotiations for a lease regear are on hold until this review has been completed. Friars House, Coventry The refurbishment of the common areas has been completed and a show suite has been created. Two new leases have completed with Hays Specialist Recruitment Limited taking a 5 year lease of 3,063 sqft of space on the 2nd floor and Economy Energy Trading Limited taking a 5 year lease on 6,880 sqft of space on the 10th floor, along with a licence for 10 car parking spaces. Santander UK Plc have renewed their lease on 6,880 sqft of space on the 3rd floor for a period of 5 years, 3 months and 4 days. Stirling House, Clydebank UPDATE: The building is now fully occupied with the completion of the letting to Ascensos of the whole building, on the agreed lease terms of 10 years with a 6 year break option and a capital contribution. Wellington House, Barnsley UPDATE: New lease agreed on the whole of the building, under three separate commercial leases with different rent start dates, based on practical completion of works. Works have been completed and tenant in occupation. Leases have now completed. Verney House, Aylesbury Dilapidation claim with previous tenant now complete. Property continues to be marketed for offices whilst alternative uses are considered. Orchard House, Blackburn The property is fully occupied. Gwent Consultancy Office, Cwmbran The sole tenant has gone into liquidation and the lease has been formally disclaimed. Marketing of the asset to let is ongoing. Oak House, Watford After the lease expiry to the sole tenant on 25th December 2015, 5 new leases have completed. Omni Capital Retail Finance Ltd have taken 4,320 sqft of space on the 1st floor for a term of 5 years, Indigo Park Services UK Limited have taken 8,750 sqft of space on the 1st floor for a term of 10 years, Fairhurst have taken 4,118 sqft of space on the 2nd floor for a term of 10 years, Secretary of State have taken 6,575 sqft of space on the 2nd floor for a term of 5 years, Pepkor have taken 6,533 sqft of space on the 2nd floor for a term of 5 years and Capita Property have taken 4,403 sqft on the 1st Floor for a term of 10 years. Heads of terms are out to other previous sub tenants, but are yet to complete. Hyde Park House, Ipswich The refurbishment works to the reception, WC's and common areas are complete which have greatly improved the internal appearance of the property. Letting complete to Christie & Co on the ground floor east suite totalling 1,696 sq ft. York House, Leicester The property is fully let to Leicester City Council on a 10 year lease, attempt to regear lease on the next rent review in February 2018.