DBRS Confirms All Classes of Real Estate Asset Liquidity Trust, Series 2015-1

DBRS Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-1 issued by Real Estate Asset Liquidity Trust, Series 2015-1:

-- Class A-1 at AAA (sf)
-- Class A-2 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 performance of the transaction has remained in line with DBRS expectations since issuance in May 2015. The collateral consists of 46 fixed-rate loans secured by 46 commercial and multifamily properties. As of the May 2016 remittance, the pool has experienced a collateral reduction of 2.5% since issuance as a result of loan amortization, with all of the original 46 loans remaining in the pool. The transaction benefits from 32 loans, representing 82.6% of the current pool balance, having some degree of recourse to their respective sponsors. Approximately nine loans, representing 35.3% of the current pool balance, are reporting year-end 2015 financials. These loans reported a weighted-average (WA) debt service coverage ratio (DSCR) of 1.31 times (x) and a WA debt yield of 10.3%. At issuance, the pool reported a WA DSCR and debt yield of 1.50x and 9.3%, respectively. There are no loans on the servicer’s watchlist or in special servicing.

The largest loan in the pool is the Alta Vista Manor loan (Prospectus ID#1, 9.2% of the current pool). This loan is secured by a five-storey, 174-unit luxury retirement home in Ottawa, Ontario. According to the March 2016 rent roll, the property was 97.7% occupied, representing an increase from issuance of 93.1%. The average rental rate was $4,056 per unit and is in line with the issuance rate of $4,047 per unit. According to the Canada Mortgage and Housing Corporation 2015 Senior Housing Report, the vacancy rate in the Ottawa East submarket decreased to 8.0% in 2015 compared with 10.4% in 2014. Properties built after 2000 reported an average rental rate of $4,078 per unit for the overall Ottawa market. The YE2015 DSCR was 1.80x and represents an increase from the DBRS underwritten (UW) DSCR of 1.56x.

The U-Haul SAC 3 Portfolio loan (Prospectus ID#35-38, 41-46, 3.7% of the current pool) is a portfolio of ten individual loans secured by ten self-storage properties, totalling 4,985 storage units. The subject $12.1 million loan represents the A2 pari passu note of the $30.2 million whole loan. The A1 note is securitized in the IMSCI 2015-6 transaction, also rated by DBRS. The individual loans are cross-collateralized and cross-defaulted by a blanket second mortgage, and the loan is fully amortizing over a 20-year loan term. The properties operate under the U-Haul brand name across ten cities in Ontario with approximately half of the portfolio by loan allocation located in the Greater Toronto Area. The largest representation is located in Oakville (15.6%), Burlington (14.8%) and Kitchener (14.4%). According to the December 2015 rent rolls, the portfolio was 90.7% occupied, representing an increase in occupancy, up from 88.4% in August 2014, with individual property occupancies ranging from 81.0% to 95.5%. The largest loan by allocated balance, U-Haul Oakville (containing 571 units), saw occupancy increase to 90.2% from 87.2% over the same period. According to YE2015 financials, the portfolio loan reported a DSCR of 1.72x, representing an increase from the DBRS UW DSCR of 1.49x. At issuance, DBRS shadow-rated this loan investment grade. 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 May 2016 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.

The applicable methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.

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