DBRS Assigns Provisional Ratings to Real Estate Asset Liquidity Trust, Series 2015-2

DBRS Limited (DBRS) has today assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-2 issued by Real Estate Asset Liquidity Trust, Series 2015-2.

-- Class A-1 at AAA (sf)
-- Class A-2 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)
-- Class X at AAA (sf)

Class X is notional. DBRS ratings on interest-only (IO) certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the IO certificates’ position within the transaction payment waterfall when determining the appropriate rating.

The collateral for the transaction consists of 37 fixed-rate loans and four pari passu co-ownership interests in separate whole loans. The mortgage loans are secured by 47 properties. One loan, representing 7.1% of the pool balance, is shadow-rated investment grade at A (high) by DBRS.

All 41 loans (including four pari passu co-ownership interests) in the transaction amortize for the entire term; 50.8% of the pool by loan balance amortizes on schedules that are 25 years or less (37.2% have between 20 years and 25 years of remaining amortization), and 49.3% of the pool by loan balance will amortize on schedules that are longer than 25 years. Fifteen loans (38.3% of the pool by loan balance) were modeled with Strong sponsor strength, and 26 loans (54.6% of the pool by loan balance) were considered to have meaningful recourse to the respective sponsor; all else equal, recourse loans typically have lower probability of default and were modeled as such.

The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized Net Cash Flow and their respective actual constants, DBRS did not identify any loans as having a debt service coverage ratio (DSCR) below 1.15 times (x), indicating less likelihood of mid-term default. However, 33.2% of the loans in the pool by loan balance have DBRS Refinance DSCRs below 1.00x, based on the trust A-note balance. The DBRS weighted-average (WA) Term DSCR and Going-In Debt Yield are 1.45x and 8.8%, respectively, and the DBRS WA Refinance DSCR and Exit Debt Yield are 1.20x and 11.8%, respectively, based on the trust A-note balance.

DBRS sampled 25 loans, representing 80.6% of the pool by loan balance, and site inspections were performed on 29 properties, representing 73.8% of the pool by loan allocated balance. Of the sampled loans, four loans, representing 22.2% of the pool balance, were considered to be of Above Average property quality.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

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

The Rule 17g-7 Report of Representations and Warranties is 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 methodology is North American CMBS Rating Methodology (June 2015), which can be found on our website under Methodologies.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.