DBRS Confirms All Classes of Real Estate Asset Liquidity Trust, Series 2007-1

DBRS has today confirmed the following classes of Real Estate Asset Liquidity Trust, Series 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 D1 at BBB (sf)
– Class D2 at BBB (sf)
– Class E1 at BBB (low) (sf)
– Class E2 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)

DBRS has placed Classes H through L on trend Negative due to concerns over loans in special servicing. The trend on the remaining classes is Stable.

There are two loans in special servicing, representing 3.2% of the current pool balance.

Impero Properties (Prospectus ID#13, 1.95% of the current pool balance) is secured by three office properties in Edmonton and was previously on the servicer’s watchlist for an unapproved second mortgage held against the collateral. The second mortgage was originally scheduled to mature in November 2009 and the borrower advised it would be unable to repay the loan. The trust loan transferred to special servicing in February 2011 for payment default. The borrower has been historically late making payments on the subject loan, but no formal workout strategy has been determined. As of the April 2012 remittance, the loan was paid through March 2012. DBRS will continue to monitor this loan.

771–785 Industriel Boulevard (Prospectus ID#68, 0.26% of the current pool balance) is secured by an industrial property located approximately 43 kilometres northwest of Montreal. This loan was previously on the servicer’s watchlist as a result of declining occupancy. According to a May 2011 rent roll, the property was 32% occupied, down from 43% at YE2009. Payments on the loan became delinquent and it was transferred to special servicing in December 2011. The YE2010 debt service coverage ratio (DSCR) shows a significant decline in cash flow since issuance, at -0.03 times (x), but a slight improvement over YE2009, when the DSCR was -0.18x. This loan was scheduled to mature on April 1, 2012. A workout strategy has not yet been confirmed by the servicer. Any loss associated with this loan would be contained within the non-rated Class M.

The rest of the pool has exhibited stable performance. Since the last surveillance review, two loans paid out of the pool at maturity. The current weighted-average (WA) DSCR and WA debt yield for the pool are 1.6x and 12.8%, respectively. In comparison, the WADSCR and WA debt yield for the pool at issuance was 1.4x and 10.6%, respectively.

DBRS currently maintains investment-grade shadow ratings on two loans in this transaction.

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.