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

DBRS Limited (DBRS) confirmed the ratings on the following Commercial Mortgage Pass-Through Certificates, Series 2014-1 issued by Real Estate Asset Liquidity Trust, Series 2014-1:

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X 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.

The rating confirmations reflect the overall stable performance of the transaction. At issuance, the collateral consisted of 34 loans secured by 46 properties with an issuance trust balance of $280.6 million. As of the August 2017 remittance, the pool has experienced a collateral reduction of 6.5% since issuance as a result of scheduled loan amortization. As of the most recent reporting on file, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.60 times (x) and 10.3%, respectively, compared with the DBRS WA Term DSCR and Debt Yield of 1.49x and 9.1%, respectively. The pool benefits from recourse guarantees on all but two loans within the pool. Historically, the Canadian commercial mortgage-backed security (CMBS) delinquency rate has remained relatively low and borrowers that have provided partial or full recourse guarantees to their respective loans have exhibited a higher likelihood to obtain replacement financing at maturity than loans with no recourse guarantee. In addition, three loans, all of which are in the top ten and cumulatively represent 13.8% of the pool, benefit from full or partial recourse to sponsors considered Strong by DBRS.

As of the August 2017 remittance, there were five loans, representing 8.8% of the pool balance, on the servicer’s watchlist. Two loans, representing 5.2% of the pool balance, are being monitored for tenant rollover, but in both cases, leases have been extended or replacement tenants have been secured. There are no loans in special servicing.

At issuance, DBRS shadow-rated one loan, The Sheraton Cavalier Hotel Calgary (Prospectus ID#5, 5.7% of the pool balance), as investment grade, supported by the strong credit metrics, strong operating history and investments made into property upgrades. However, as the collateral property’s performance has declined significantly since issuance as the result of general economic difficulty within Calgary, and as those trends are not expected to be reversed in the near to medium term, DBRS has removed the shadow rating for that loan with this review.

The rating assigned to Class F materially deviates from the lower rating implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted due to uncertain loan-level event risk.

The rating assigned to Class X materially deviates from the lower rating implied by the quantitative results. Consideration was given for actual loan, transaction and sector performance where a rating based on the lowest rated notional class may not reflect the observed risk.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans in the transaction, as well as the top ten loans, in the DBRS CMBS IReports platform. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register or log into DBRS CMBS IReports at www.ireports.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 principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies.

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

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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