DBRS Morningstar Confirms All Ratings on Real Estate Asset Liquidity Trust, Series 2019-1

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-1 issued by Real Estate Asset Liquidity Trust, Series 2019-1:

-- 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) (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.

The rating confirmations reflect the overall stable performance of the transaction since issuance. At issuance, the pool consisted of 48 loans secured by 77 commercial properties with an original trust balance of $446.4 million. Per the June 2020 remittance, all loans currently remain in the pool with a current trust balance of $438.4 million, representing a collateral reduction of 2.0% from the issuance balance because of scheduled amortization. At issuance, the pool reported DBRS Morningstar Loan-to-Value and DBRS Morningstar Term Debt Service Coverage ratios of 63.4% and 1.39 times (x), respectively. Twenty-eight loans, representing 60.4% of the issuance pool balance, have some form of recourse to various entities of their sponsors and all loans in the pool amortize for the entirety of their respective loan terms. There is significant property concentration within the pool as 23 loans, representing 49.8% of the issuance pool balance, are secured by retail properties.

Per the June 2020 remittance, five loans, representing 19.8% of the current pool, are on the servicer’s watchlist. These loans include the largest loan in the pool, WSP Place (Prospectus ID#1; 8.5% of the pool), secured by a 184,707-square foot office property in downtown Edmonton. This loan was added to the servicer’s watchlist in May 2020 because the borrower, who serves as the full-recourse entity, requested Coronavirus Disease (COVID-19)-related payment relief. A forbearance agreement has yet to be finalized; however, the servicer advanced funds to cover shortfalls for May and June 2020. In addition to the cash flow interruption caused by the coronavirus, the subject previously lost its third-largest tenant since issuance, AIMCo (8.5% of the net rentable area), upon its lease expiration in December 2019. Given the high vacancy rate in the subject’s downtown government submarket and the ongoing effects of the coronavirus, DBRS Morningstar elevated the probability of default (POD) in its analysis for this review. The remaining four loans on the watchlist were added between May and June 2020 because of requests for coronavirus-related payment relief. DBRS Morningstar does not have property-level updates regarding these loans; however, forbearance agreements have been executed for these watchlisted loans, which generally involve the deferral of interest and/or principal followed by set repayment periods that begin later in 2020. DBRS Morningstar also elevated the PODs for these loans in its analysis for this review.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Class X is an interest-only (IO) certificate that references a single rated tranche or 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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides analysis and in-depth commentary in the DBRS Viewpoint platform for loans in the transaction. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577