OREANDA-NEWS. August 10, 2015.  Fitch Ratings has assigned Logistics UK 2015 PLC's notes due August 2025 final ratings as follows:

GBP312.6m class A (ISIN XS1255426543) : 'AAAsf'; Outlook Stable
GBP0m class X1: not rated
GBP0m class X2: not rated
GBP67.5m class B (ISIN XS1255427194): 'AAsf'; Outlook Stable
GBP67.5m class C (ISIN XS1255427350): 'Asf'; Outlook Stable
GBP60.8m class D (ISIN XS1255427608): 'BBBsf'; Outlook Stable
GBP76m class E (ISIN XS1255428754): 'BB-sf'; Outlook Stable
GBP61.8m class F (ISIN XS1259063037): 'Bsf'; Outlook Stable

The transaction is a securitisation of 95% of a single GBP680m commercial real estate loan advanced to entities related to Blackstone Real Estate Partners by Goldman Sachs Bank USA (GS). The loan is backed by a portfolio of 42 logistics assets located throughout the UK.

KEY RATING DRIVERS
The final ratings are based on Fitch's assessment of the underlying collateral, available credit enhancement and the transaction's sound legal structure.

High Quality Portfolio
The overall standard of the collateral is considered by Fitch as near prime. Many of the properties are let at prime market rents and are located in desirable hubs for goods distribution in the UK. Although not all the properties are modern, the build quality of each asset is suitable for the majority of occupiers. While concentrated in logistics, the portfolio is well diversified regionally and by occupier.

High Leverage
The loan has a day one reported loan-to-value ratio (LTV) of 69% compared with Fitch's 'Bsf' LTV of 94%. Leverage is high compared with some other bullet loans in recent European CMBS, while interest coverage ratio (ICR) cash trap test (1.2x) and deleveraging requirements upon property disposal are both low. These terms reflect not only the borrower's bargaining power but also the level of competition for high quality UK portfolios.

E-commerce Growth
Growth in online retail purchases has surged in recent years, creating a need for additional distribution space. The UK ranks in the top three e-commerce markets globally, driving demand for high quality logistics to service the needs of consumers insistent on fast delivery. This source of occupational demand is reinforced by technological advances throughout the supply chain and is therefore at low risk of facing a reversal in the medium term.

Experienced Asset Management
As a portfolio company of Blackstone, Logicor operates more than 91 million square feet (sq. ft) of logistics warehouse facilities across Europe, and is well placed to manage occupancy in the collateral portfolio via its established asset management network.

KEY PROPERTY ASSUMPTIONS (all by market value)
'Bsf' weighted average (WA) capitalisation (cap) rate: 6.9%
'Bsf' WA structural vacancy: 11.7%
'Bsf' WA rental value decline: 2.4%

'BBsf' WA cap rate: 7.5%
'BBsf' WA structural vacancy: 13%
'BBsf' WA rental value decline: 4.5%

'BBBsf' WA cap rate: 8%
'BBBsf' WA structural vacancy: 14.4%
'BBBsf' WA rental value decline: 6.5%

'Asf' WA cap rate: 8.6%
'Asf' WA structural vacancy: 15.8%
'Asf' WA rental value decline: 9.3%

'AAsf' WA cap rate: 9.3%
'AAsf' WA structural vacancy: 17.2%
'AAsf' WA rental value decline: 13.3%

'AAAsf' WA cap rate: 10%
'AAAsf' WA structural vacancy: 22.7%
'AAAsf' WA rental value decline: 18.5%

RATING SENSITIVITIES

The change in model output that would apply if the capitalisation rate assumption for each property is increased by a relative amount is as follows:

Current rating- class A/ B/ C/ D/ E/ F: 'AAAsf'/ 'AAsf'/ 'Asf'/ 'BBBsf'/ 'BB- sf'/ 'Bsf'
Increase capitalisation rates by 10% class A/ B/ C/ D/ E/ F: 'AAsf'/ 'Asf'/ 'BBB+sf'/ 'BB+sf'/ 'Bsf'/'CCC sf'
Increase capitalisation rates by 20% class A/ B/ C/ D/ E/ F: 'AAsf'/'A- sf'/'BBB- sf'/'B+ sf'/'CCCsf'/'CCCsf'

The change in model output that would apply if the rental value decline (RVD) and vacancy assumption for each property is increased by a relative amount is as follows:

Increase RVD and vacancy by 10% class A/ B/ C/ D/ E/ F: 'AA+sf'/ 'AAsf'/ 'Asf'/ 'BBBsf'/ 'BB- sf' / 'Bsf'
Increase RVD and vacancy by 20% class A/ B/ C/ D/ E/ F: 'AA+sf'/ 'AA- sf'/'A-sf'/ 'BBB-sf'/ 'BB-sf'/ 'B-sf'

The change in model output that would apply if the capitalisation rate, RVD and vacancy assumptions for each property is increased by a relative amount is as follows:

Increase in all factors by 10% class A/ B/ C/ D/ E/ F: 'AA+sf'/ 'A+sf'/ 'BBBsf'/ 'BBsf'/ 'Bsf'/ 'CCCsf'
Increase in all factors by 20% class A/ B/ C/ D/ E/ F: 'AA-sf'/ 'BBB+sf'/ 'BB+sf'/ 'Bsf'/ 'CCCsf' / 'CCCsf'

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from KPMG. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison of certain characteristics with respect to the 42 properties in the portfolio. Fitch reviewed this information which indicated no adverse findings material to the rating analysis.

DATA ADEQUACY

Fitch reviewed the results of a third party assessment conducted on the asset portfolio information, which indicated no adverse findings material to the rating analysis.

Overall Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION
The information below was used in the analysis:
- Facility agreement provided by the originator as of end-June 2015
- On-site visit of a sample of properties conducted by the agency's analysts as of end-May 2015
- A full valuation report provided by CBRE as of 8 May 2015
- Asset portfolio information provided in the form of a Fitch data template
- Due diligence reports addressing technical, environmental, legal and tax aspects of each property prepared by third-party professionals

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 Logistics UK 2015 PLC - Appendix, dated 7 August 2015 and available at www.fitchratings.com). In addition please refer to the special report "Representations, Warranties, and Enforcement Mechanisms in Global Structured Finance Transactions" dated 26 March 2015 available on the Fitch website.