DBRS Confirms Fifteen and Downgrades 3 Classes of Real Estate Asset Liquidity Trust, Series 2005-2

DBRS has today confirmed the ratings of fifteen classes of Real Estate Asset Liquidity Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-2 as follows:

Class A-1 at AAA
Class A-2 at AAA
Class XP-1 at AAA
Class XC-1 at AAA
Class XP-2 at AAA
Class XC-2 at AAA
Class B at AA
Class C at A
Class D-1 at BBB
Class D-2 at BBB
Class E-1 at BBB (low)
Class E-2 at BBB (low)
Class F at BB (high)
Class G at BB
Class H at BB (low)

In addition, DBRS has downgraded three classes as follows:

Class J to B from B (high)
Class K to B (low) from B
Class L to CCC from B (low)

DBRS does not rate the $6.1 million first loss piece, Class M.

All trends for the rated classes of this transaction are Stable.

The pool collateral has been reduced by 24%, with the current pool balance at approximately $471 million.

Overall, the financial performance for the remaining collateral is stable, with a weighted-average debt-service coverage ratio (WADSCR) of 1.71x and a weighted-average loan-to-value (WALTV) of 63.1%. In addition, there is one defeased loan, representing 0.42% of the pool.

The ratings actions are the result of potential losses associated with two loans in special servicing.

Prospectus ID#14, Duncan Mill Road, transferred to the special servicer in June 2010 because of property maintenance issues, tax payments in arrears and non-payment of reserves as required by the loan documents. Although DBRS does not anticipate significant losses on this loan, the property condition issues could make this loan a potential risk to the trust. The property is located in northeast Toronto, south of Highway 401 and the current loan balance is approximately $9.4 million. The asset caters mainly to medical office tenants and, as property condition issues improve, it is likely to be a competitive option for this tenant base, given its close proximity to the North York General Hospital.

Prospectus ID#67, Metropolitan Road, transferred to the special servicer in April 2010 after the borrower advised the servicer that they could no longer fund debt-service payments out-of-pocket, as they had been doing since early 2009 when the single tenant at the property (Wing Son Garments) filed for bankruptcy and vacated the property. The loan received an updated appraisal in August 2010 in excess of the current loan balance; however, DBRS believes losses are possible on this loan given the anticipated expenses and special servicing fees.

DBRS has removed the shadow ratings on the InnVest Portfolio (Radison Portfolio), The Toronto Congress Centre and the InnVest – Holiday Inn Select Loan, due to a decline in performance since issuance.

DBRS conducted a full review of the transaction, with in depth analysis focusing on the top ten loans, the servicer’s watchlisted loans and the specially serviced loans, which cumulatively represent approximately 64% of the current pool balance.

DBRS continues to monitor this transaction on a monthly basis in the Monthly Global CMBS Surveillance Report, which can provide more detailed information on the individual loans in the pool.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology and CMBS Surveillance, which can be found on our website under Methodologies.