DBRS Assigns Provisional Ratings to Real Estate Asset Liquidity Trust, Series 2019-1

DBRS Limited (DBRS) assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-1 to be issued by Real Estate Asset Liquidity Trust, Series 2019-1 (the Issuer):

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class X at A (high) (sf)
-- Class C at A (sf)
-- Class D-1 at BBB (sf)
-- Class D-2 at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)

All trends are Stable.

Classes D-2, E, F and G will be privately placed. The Class X balance is notional.

The collateral consists of 43 fixed-rate loans, four pari passu co-ownership interests and one senior co-ownership interest (collectively, the loans) secured by 77 commercial properties. The transaction is of a sequential-pay pass-through structure. 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 (NCF) and their respective actual constants, one loan, representing 4.9% of the total pool, had a DBRS Term Debt Service Coverage Ratio below 1.15 times, which is a threshold indicative of a high likelihood of mid-term default.

Twenty-eight loans, representing 60.4% of the pool, were considered to have meaningful recourse to the respective sponsor; all else being equal, recourse loans typically have a lower probability of default and were analyzed as such. Based on the DBRS sample and analysis, three loans (18.5% of the pool) were considered to be of Above Average property quality and three loans (11.0% of the pool) of Average (+) property quality. Higher-quality properties are more likely to retain existing tenants and more easily attract new tenants, resulting in more stable performance. All loans in the pool amortize for the entire term, with 23.4% of the pool amortizing on schedules that are 25 years or fewer, and the remaining loans amortizing on schedules that are between 25 and 30 years.

The DBRS sample included 32 of the 48 loans in the pool, representing 87.5% of the pool by loan balance. Site inspections were performed on 50 of the 77 properties in the portfolio (64.2% of the pool by loan balance). The DBRS-sampled loans had an average NCF variance of -4.95% from the Issuer’s NCF and ranged from -11.9% (Leima Office Building) to -0.9% (Group Guzzo Retail Terrebonne). For the non-sampled loans, DBRS applied the average NCF variances of RBC-originated loans and acquired loans, respectively.

Class X, which is interest only (IO), references multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrs.com.

DBRS will continue to monitor this transaction with periodic updates provided in the DBRS Viewpoint platform.

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

With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS’s methodology, DBRS used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is the North American CMBS Multi-borrower Rating Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

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

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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

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

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