DBRS Upgrades One Class of Merrill Lynch Mortgage Loans, Inc., Series 1998-Canada 1

DBRS has today upgraded the rating of one class of Merrill Lynch Mortgage Loans, Inc., Series 1998-Canada 1 as follows:

-- Class E to AAA (sf) from AA (sf)

The remaining classes were confirmed as follows:

-- Class F at A (sf)
-- Class X at AAA (sf)

All trends are Stable.

The rating actions reflect the overall stable performance of the two remaining loans in the pool, with a weighted-average debt service coverage ratio (DSCR) of 1.33 times (x) and a weighted-average debt yield of 27.28%, as calculated on the YE2011 net cash flow (NCF) figures for both loans. Both loans are fully amortizing and are expected to repay in full by the final amortization dates in 2018 and 2020, respectively. DBRS does not rate the first-loss Class G, which has a current balance of $4.7 million, representing approximately 42% of the remaining trust balance.

One of the two remaining loans has seen a significant decrease in DSCR from YE2010 to YE2011. Prospectus ID #3 King’s Health Centre, representing 53.83% of the current balance, is secured by a 177,859 square foot (sf) office property located in downtown Toronto. The property has experienced an occupancy decrease from 78% at YE2010 to 68% at YE2011 due to the largest tenant downsizing at the property. As a result, there was a corresponding decline in financial performance with a significant DSCR decrease from 1.71x at YE2010 to 1.16x at YE2011. Despite the decline in DSCR and occupancy, none of the leases at the property will expire prior to the final loan payment and the leverage of the loan is currently low, at $42 per unit.

Prospectus ID #9 Hotel Manoir Victoria, representing 46.17% of the current balance, is secured by 145-key full service hotel in Quebec City. The hotel is well located in Old Quebec City and benefits from being within walking distance of public transportation, local entertainment venues, and several tourist attractions. At YE2011, the property was 63.40% occupied, with an average daily rate (ADR) of $152.64 and revenue per available room (RevPar) of $96.77. The loan has a healthy DSCR of 1.52x at YE2011 and a strong debt yield of 29.03%. The trust’s exposure per key is considered reasonable, at $32,765.

For additional detail on the DBRS viewpoint for this transaction, and for details on all of the remaining loans in the pool, please see the February 2013 Monthly CMBS Surveillance Report for this transaction, which will be published shortly.

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

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (November 2012), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.