DBRS Confirms All Classes of Real Estate Asset Liquidity Trust, Series 2014-1

DBRS Limited (DBRS) has today confirmed the ratings on the following classes in the Real Estate Asset Liquidity Trust, Series 2014-1 transaction:

-- Class A at AAA (sf)
-- Class X at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)

All trends are Stable. DBRS does not rate the first loss piece, Class H.

The rating confirmations reflect that the current performance of the transaction has remained in line with DBRS expectations since issuance in October 2014. The collateral consists of 34 fixed-rate loans secured by 46 properties. As of the September 2015 remittance, the pool had experienced a collateral reduction of 2.0% since issuance as a result of scheduled loan amortization. The transaction benefits from 78.7% of the current pool balance being secured by properties located in urban markets and 32 loans, representing 91.2% of the current pool balance, having partial or full recourse to their respective sponsors. There are no loans on the servicer’s watchlist or in special servicing.

At issuance, DBRS shadow-rated one loan, Sheraton Cavalier Hotel Calgary (Prospectus ID#5), representing 5.7% of the current pool balance, as investment grade. The loan is secured by a 306-key, nine-storey, full-service hotel located in Calgary, Alberta. This hotel is located in close proximity to the Calgary International Airport and caters mainly to corporate clientele. The subject has operated under the Sheraton flag since its original construction in 1983 and the current franchise agreement expires beyond the loan term in 2033. The YE2014 debt service coverage ratio was strong at 4.28 times when occupancy was 75.8%. According to the March 2014 Smith Travel Research report, the subject outperformed its competitive set based on the trailing 12 months (T-12) average daily rate and the revenue per available room, which were $162.27 and $123.85, respectively. The subject benefits as it is the only four-star hotel in the area. Given that the oil and gas industry is a main economic driver for the region, the recent volatility in oil prices is concerning and may potentially have a negative impact on future loan performance. According to the borrower’s T-12 financial statement ending April 30, 2015, occupancy was down only marginally to 72.5% while the average daily rate increased to $165.18. Additionally, the experience of the hotel owners and their long-term commitment shown through recent renovations in addition to the subject’s historical performance provides comfort in the future performance of the loan. DBRS has today confirmed that the performance of the loan remains consistent with investment-grade loan characteristics.

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 and loans on the servicer’s watchlist. The September 2015 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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodologies are North American CMBS Rating Methodology (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.