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

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

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the February 2021 remittance, 13 of the original 34 loans remained in the pool, with an aggregate trust balance of $107.3 million, representing a collateral reduction of approximately 61.8% since issuance as a result of loan repayment and scheduled loan amortization. The transaction is concentrated by property type, as seven loans, representing 41.3% of the current trust balance, are secured by retail assets, while three loans, representing 24.9% of the current trust balance, are secured by self-storage properties. The pool is also concentrated by loan size, as the three largest loans in the pool represent 50.0% of the remaining trust balance. One loan, representing 7.2% of the current trust balance, has been fully defeased. All loans remaining in the pool benefit from some level of material recourse to the loan’s sponsor. There are five loans, representing 39% of the current trust balance, that are scheduled to mature in August 2021; generally, refinance prospects look favorable for these loans despite the ongoing Coronavirus Disease (COVID-19) pandemic.

The largest loan, Skyline Industrial Montreal (Prospectus ID#1, 23.0% of the current trust balance), is secured by six industrial buildings totaling 562,045 sf in the Greater Montréal submarkets of West Island, Lachine, and Saint-Laurent. All of the properties are close to major transportation networks and the Montréal-Pierre Elliot Trudeau International Airport. Based on the most recent rent roll, the properties were 100.0% occupied and leased to 14 tenants. The largest tenant, Silgan Plastics Canada Inc. (34.3% of the net rentable area (NRA)), recently extended its lease by five years through December 2023 at a rental rate of $5.40 per square foot (psf), slightly above the issuance rate of $5.30 psf. While there is some near-term tenant rollover risk in the third-largest tenant (16.2% of the NRA, expiring May 2021) prior to the loan’s scheduled maturity in August 2021, the tenant has been in occupancy at the property since 2001, and historical loan performance has been healthy, with the most recent reporting reflecting a debt service coverage ratio of 1.50x as of YE2019. In addition, the loan has full recourse to the sponsorship group, Skyline Commercial Real Estate Limited Partnership.

According to the February 2021 remittance report, there are no loans in special servicing or delinquent, but there are two loans on the servicer’s watchlist, representing 23.5% of the current trust balance. Both these loans have been affected by the ongoing difficulties caused by the coronavirus. One of the loans, 1015 Golf Links Roads (Prospectus ID#2, 15.7% of the current trust balance), was granted forbearance in June 2020. A subsequent deferral was granted, extending the principal portion deferral to include July through September 2020 payments. Repayment commenced in October 2020, with deferred amounts being made up in nine equal installments through July 2021.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Class X is an interest-only (IO) certificate that references multiple rated tranches. When determining the rating assigned to Class X, consideration was given for actual loan, transaction, and sector performance where a rating based on the lowest-rated applicable reference obligation may not reflect the observed risk.

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 updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Skyline Industrial Montreal (23.0% of the pool)
-- Prospectus ID#2 – 1015 Golf Links Road (15.7% of the pool)

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 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.

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