DBRS Confirms 16 Classes of Merrill Lynch Financial Assets Inc., Series 2006-Canada 19

DBRS has today confirmed the ratings of the Merrill Lynch Financial Assets Inc., Series 2006-Canada 19 transaction as follows:

• Class A-1 at AAA
• Class A-2 at AAA
• Class A-3 at AAA
• Class XP-1 at AAA
• Class XP-2 at AAA
• Class XC at AAA
• Class B at AA
• Class C at A
• Class D at BBB
• Class E at BBB (low)
• Class F at BB (high)
• Class G at BB
• Class H at BB (low)
• Class J at B (high)
• Class K at B
• Class L at B (low)

Classes A-1 though H have been confirmed with Stable trends. Classes J through L have been confirmed with a Negative trend. DBRS has assigned negative trends to Classes J and L because of the concern associated with the performance deterioration of the large loans on the servicer’s watchlist.

The Marriott Pooled Senior Loan is collateralized by five limited-service Marriott hotel properties located in the Greater Toronto Area (GTA). Three of the properties are flagged by the Courtyard division of Marriott; the other two are flagged as Residence Inns. The combined unit count for the portfolio is 632 rooms. The whole-loan balance of $73.5 million is comprised of two pari-passu A-notes each in the original principal amount of $25.4 million and an unsecuritized B-note in the original principal amount of $22.6 million. The loan transferred to the special servicer in August 2009 when the borrower advised the servicer that it could no longer fund the full debt service for the loan and fund the scheduled property improvement plans (PIPs) scheduled for the three Courtyard properties. Since that time, the servicer has negotiated a forbearance agreement, directing all cash flows from the property to fund the debt service on the A-notes (which have been current since the loan’s transfer to the special servicer) and to fully fund the PIPs, prior to any payment of the B-note. The forbearance period has two one-year extension options. The servicer is currently processing the borrower’s request to exercise the first one-year extension option. The YE2010 performance for the portfolio is quite strong, with the DSCR at 2.00x for the A-notes and 1.20x for the whole-loan balance. Additionally, the updated appraised value of $69.4 million, as of April 2010, is a 23% decline from the issuance value, though it is still favourable on an A-note basis, with the current A-note balance at approximately $51 million. Occupancy for the properties during that period ranged from 69% to 82%; these figures are representative of a year-over-year improvement for each property on an individual basis from 2009. The first phase of the PIPs for the Courtyard properties is scheduled for completion in the summer of 2011, with renovations to the lobbies and common areas. The second phase, which will include renovations to the guest rooms, is scheduled to commence in the second half of 2011. The loan will remain with the special servicer through full repayment of the A-notes. DBRS will continue to monitor these loans closely.

The Sunpark Plaza loan (Prospectus ID#16, 1.94% of the current pool balance) is secured by a 55,000 sf office property located in Calgary. The current loan per square foot is approximately $185 and the debt yield, based on the YE2009 NCF, is approximately 9%. The loan transferred to the special servicer in May 2010 because of delinquent payments and association dues; however, the borrower has since brought the loan current. The property was 65% occupied when the loan transferred to the special servicer and since then, occupancy has improved to 74%, according to the December 2010 rent roll. The loan matures in June 2013 and based on the recent improvement in occupancy, in addition to the borrower bringing the payments current, DBRS, at this time, does not anticipate a significant loss to the trust associated with this loan. DBRS will continue to monitor the loan carefully.

The Castel Royale loan (Prospectus ID#3, 5.34% of the current pool balance) is secured by a 250-unit Independent Living facility in Montreal. The current loan per unit is approximately $113,000 with a debt yield of 6.9%, based on the YE2009 NCF. This loan is current but has been on the servicer’s watchlist since November 2008 for occupancy issues, and as of YE2009, occupancy has remained in the 83% range. Despite the occupancy issues, the loan has remained current since it was placed on the servicer’s watchlist. In addition, the property benefits from the substantial renovations competed in 2005 and the loan has full recourse to Chartwell Seniors Housing REIT, one of the largest owners and operators of this property type across Canada. This loan does not mature until December 1, 2015.

The 8100 Granville loan (Prospectus ID#10, 2.74% of the current pool balance) is secured by a 95,000 sf office property located in Richmond, British Columbia. The current loan per square foot is approximately $163 and the debt yield, based on the YE2009 NCF, is approximately 4%. This loan is current but has been on the servicer’s watchlist since July 2008 because of low occupancy. The YE2009 occupancy rate was reported at 57%, which caused cash flow to decline approximately 60% from the issuance levels, and is indicative of the 0.51x DSCR for YE2009. The property has suffered from occupancy issues since 2007 when the Worker’s Compensation Board (formerly 56% of the NRA) vacated. According to Altus Insite, the property is currently 68% occupied. DBRS is currently awaiting an updated rent roll, however, the improvement in occupancy is considered a stabilizing factor.

DBRS has confirmed the shadow rating of AA (sf) for the Wal-Mart Collingwood loan (Prospectus ID#8, 3.04% of the current pool balance) based on the long term lease to an investment-grade tenant.

At issuance, DBRS shadow rated the Winnipeg Health loan A (high) (sf) (Prospectus ID#61, 0.33% of the current pool balance) based on the rating of the underlying tenant. DBRS no longer views this loan as shadow rated.

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.