DBRS Confirms Ratings on All Classes of Real Estate Asset Liquidity Trust, Series 2016-2

DBRS, Inc. (DBRS) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-2 issued by Real Estate Asset Liquidity Trust, Series 2016-2 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class X at A (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.

The rating confirmations reflect the overall stable performance exhibited by the transaction since issuance in September 2016. The collateral consists of 47 fixed-rate loans secured by 72 commercial properties. As of the September 2017 remittance, all original loans remain in the pool with an aggregate principal balance of $410.8 million, representing a collateral reduction of 2.5% due to scheduled loan amortization.

Loans representing 78.2% of the current pool balance have reported 2016 net cash flow figures. These loans are reporting a weighted-average (WA) debt service coverage ratio (DSCR) of 1.50 times (x), which compares favourably with the DBRS term DSCR of 1.38x for the entire pool at issuance. Thirteen of the largest 15 loans are reporting YE2016 cash flow figures. These loans are reporting a WA DSCR and debt yield of 1.53x and 9.1%, respectively, indicative of WA net cash flow growth of 8.3% over the DBRS issuance figures.

As of the September 2017 remittance report, there is one loan, representing 2.0% of the current pool balance, on the servicer’s watchlist. The loan was added, as the former single tenant vacated the property ahead of its lease expiration date in May 2019. The tenant continues to pay rent and is expected to do so through lease maturity. The loan had a YE2016 DSCR of 1.18x and is cross-collateralized and cross-defaulted with another loan in the pool, which continues to perform as expected.

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, including the top ten loans, in the DBRS commercial mortgage-backed securities (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 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.