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 pool continues to perform as expected, with four loans paying out of the pool since the last surveillance review. One of the repaid loans was a loan formerly on the servicer’s watchlist and another was formerly in special servicing. Impero Properties (Prospectus ID#13) was secured by a three-property portfolio located in Edmonton, Alberta. The loan was transferred to the special servicer in February 2011 as a result of payment default. A purchase of all three properties resulted in a full payoff of the loan with no loss to the trust. There has been healthy net cash flow (NCF) growth in the largest 15 loans, with a weighted-average NCF change of 19.2% since issuance. Additionally, the weighted-average debt service coverage ratio (DSCR) and weighted-average debt yield for these loans were 1.60 times (x) and 13.4%, respectively.

There remains one loan in special servicing as of the March 2014 remittance. 771-785 Industriel Boulevard (Prospectus ID#68, 0.3% of the current pool balance) was originally placed on the servicer’s watchlist in January 2009 when the property’s occupancy declined to 30%. After a period of continued delinquency, the loan transferred to special servicing in December 2011. According to the servicer commentary, a sale of the property was expected to have closed in February 2014. DBRS is awaiting confirmation of the sale’s execution and expects this loan to pay off in full.

Five loans are currently on the servicer’s watchlist, two of which have been flagged for items of deferred maintenance. Of the three watchlist loans flagged for cash flow decline, the largest is Rockyview Professional Centre (Prospectus ID#11, 2.5% of the current pool balance). This loan is secured by a small office property located south of the Calgary central business district. As of March 2013, the property was just 62.7% occupied and the YE2012 DSCR was reported to be 0.85x. Despite the operating shortfall, the borrower has continued investing in the property. According to a March 2013 servicer site inspection, the property’s bathrooms, stairwells and elevators were undergoing renovations, with an estimated completion cost of $450,000.

DBRS maintains investment-grade shadow ratings on two loans in this transaction, which represent 20.8% of the current pool balance combined. DBRS has today confirmed the shadow ratings in conjunction with the above rating actions.

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 loan in special servicing and the loans on the servicer’s watchlist. The March 2014 Monthly CMBS 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 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.