DBRS Confirms the Ratings of REAL-T, Series 2007-1

DBRS has today confirmed the ratings of REALT 2007-1 as follows:

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

All trends are Stable.

In addition, DBRS has confirmed the shadow-ratings for Langley Power Centre (8.32% of the current pool balance) at BBB (high) and Atrium Pooled Interest (8.21% of the current pool balance) at A (low). DBRS has removed the shadow-rating for Port Kells Industrial due to decline in net cash flow since issuance and upcoming tenant roll.

After approximately 51 months of seasoning, the underlying loans have exhibited stable performance, with the transaction's weighted-average DSCR increasing to 1.61x from 1.37x at issuance. All 76 loans from issuance remain in the pool as of the June 2011 remittance. The servicer's watchlist consists of four loans (4.1% of the current pool balance), although one of these loans, Impero Properties (1.91% of the current pool balance), reportedly transferred to special servicing in September 2010. The pool is concentrated within the top ten loans, which represent 53.6% of the pool. This risk is mitigated by the fact that there are a total of 30 properties that collateralize the top ten loans. Additionally, DBRS maintains investment grade shadow-ratings on two of the top ten loans.

Impero Properties was originally placed on the servicer’s watchlist due to the discovery of unauthorized subordinate debt registered on the property in the amount of $3 million. The loan was then transferred to the special servicer for payment default. Since the transfer in September 2010, the loan has remained one month or less past due, as the borrower has continued to remit payments in order to bring the loan current. Collateral for the loan is a roll-up of three office buildings in Edmonton. The current leverage point for the loan, on a per square foot basis, is $79, and the average occupancy across the properties is 96%, according to the February 2011 rent roll. DBRS will continue to monitor this loan.

One loan on the servicer’s watchlist, 771-785 Industriel Boulevard (0.25% of the current pool balance), is also more than 90 days delinquent. This loan was placed on the watchlist in January 2009 when the property’s occupancy dropped to below 30% from 100% at issuance. The loan is paid through December 2010 and has not yet been transferred to special servicing. DBRS will continue to monitor this loan.

The DBRS analysis included an in-depth look at the top fifteen loans in the transaction, in addition to the loans on the servicer’s watchlist, DBRS Hotlist, shadow-rated loans, and one loan in special servicing. Cumulatively, these loans represent 67.5% of the current pool balance.

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

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