DBRS Upgrades Three Classes and Confirms 12 Classes of Real Estate Asset Liquidity Trust, Series 2004-1

DBRS has today confirmed the following classes of Real Estate Asset Liquidity Trust, Series 2004-1 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class X at AAA (sf)
-- Class E1 at A (low) (sf)
-- Class E2 at A (low) (sf)
-- Class F at BBB (sf)
-- Class G at BBB (low) (sf)
-- Class H at BB (sf)
-- Class J at B (high) (sf)
-- Class K at B (sf)
-- Class L at B (low) (sf)

DBRS has also upgraded the following classes of Real Estate Asset Liquidity Trust, Series 2004-1 as follows:

-- Class C to AA (high) (sf) from AA (sf)
-- Class D1 to A (high) (sf) from A (sf)
-- Class D2 to A (high) (sf) from A (sf)

In addition, DBRS has placed Classes C through G on Positive trend. The trends on all other classes are Stable.

The upgrades and trend changes are a result of the continued health and performance of the pool overall. The collateral in this transaction has been reduced by approximately 47.3% since issuance. The current weighted-average (WA) Debt Service Coverage Ratio (DSCR) and WA Debt Yield are 2.1 times (x) and 22.9%, respectively. In comparison, the WA DSCR and WA Debt Yield for the pool at issuance were 1.6x and 13.4%, respectively. The fifteen largest loans represent 59.8% of the current pool balance. There are two loans on the servicer watchlist, representing 3.8% of the current pool balance.

8655 Foucher Street/600-675 Cremazie Blvd (Prospectus ID#27, 2.08% of the current pool balance) is secured by a multifamily property with a ground floor retail component in Montréal and was placed on the servicer watchlist in July 2010 because of a low DSCR – a result of declining rental rates. The borrower reportedly indicated the drop in rates was necessary in order to maintain occupancy and remain competitive in the area. On a positive note, the DSCR improved to 1.0x at YE2011 from 0.91x at YE2010. Occupancy has been stable, and was reported to be 93% in Q4 2011.

Victoria House (Prospectus ID# 35, 1.72% of the current pool balance) is secured by an independent living property in Orillia, Ontario. This loan was placed on the servicer watchlist in April 2011 because of a decline in DSCR. According to the most recent servicer site inspection, the property is well maintained and in Good condition. The property has been well occupied historically.

Approximately 37.1% of the pool is deemed investment grade by DBRS. DBRS currently maintains investment-grade shadow ratings on two loans in this transaction, and fully defeased loans represent an additional 24.9% 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.