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:

-- Classes A-1, A-2, XC-1, XC-2, XP-1 and XP-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Classes D-1 and D-2 at BBB (sf)
-- Classes 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)

The trend on all rated classes is Stable. The above ratings actions have resulted in a Trend Change for Classes H through L, given updated information regarding the loans in special servicing.

The pool continues to perform as expected, with four loans paying out of the pool since the last surveillance review as a result of loan maturities. One loan is scheduled to mature in 2013 and has a current debt yield of 15.3%. There has been healthy cash flow growth in the Top 15 loans overall, with a weighted-average net cash flow change of 14.2% since issuance. The weighted-average debt yield, debt service coverage ratio (DSCR) and occupancy for these loans are 11.2%, 1.48x and 94%, respectively. The Top 15 loans and the pool overall also benefit from strong sponsorship and recourse to institutional borrowers, such as H&R REIT, RioCan REIT, Dundee REIT and Allied Properties REIT.

One loan in the Top 15 is in special servicing. Impero Properties (Prospectus ID#13, 2.1% of the current pool balance) was previously on the watchlist for $3 million in unapproved subordinate debt held against the collateral. The second mortgage reportedly matured in November 2009, with the borrower advising that it would be unable to pay the balance. The loan was transferred to special servicing in February 2011 for payment default. This loan, having undergone periods of chronic delinquency before being paid current, is considered 30-59 days delinquent as of the March 2013 remittance. A 2011 appraisal valued the property at $19.5 million, well above the loan’s trust balance. According to the servicer, the borrower is currently negotiating a sale of the asset. DBRS does not expect the trust will realize any loss as a result of the disposition of this loan.

One loan, representing 0.3% of the current pool balance, was scheduled to mature in April 2012, but currently remains outstanding and in special servicing. 771-785 Industriel Boulevard is more than 90 days delinquent and has an outstanding principal balance of $1.1 million. According to the special servicer, an offer has been made to purchase the collateral for $1.35 million. DBRS expects that any loss associated with this loan will be easily contained to the unrated class.

DBRS maintains investment-grade shadow ratings on two loans in this transaction, together representing 19.2% of the current pool balance. DBRS has today confirmed these shadow ratings.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool, the loans in special servicing and the loans on the servicer’s watchlist. The March 2013 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

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

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North America Surveillance (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.