DBRS Morningstar Confirms All Classes of Real Estate Asset Liquidity Trust, Series 2018-1

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2018-1 issued by Real Estate Asset Liquidity Trust, Series 2018-1 as follows:

-- 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.

This rating confirmations reflect the overall stable performance of the transaction since issuance. As of the November 2021 remittance, there has been a 18.0% collateral reduction, with 46 of the original 70 loans remaining in the pool. Although the bulk of the underlying loans are performing as expected, there are four loans on the servicer's watchlist representing approximately 5.0% of the current pool balance. Those loans have been flagged for a variety of reasons including relief requests, a low debt service coverage ratio (DSCR), an upcoming loan maturity, and an approaching single tenant expiry.

The largest loan on the servicer’s watchlist, Quality Hotel Dorval (Prospectus ID#9, 3.5% of the pool balance), has been flagged for two relief requests. The 161-key full service hotel is in the borough of Saint-Laurent in Montréal, approximately five minutes from the Montréal–Trudeau International Airport. The loan was added to the servicer’s watchlist in July 2020 when the borrower was granted a deferral of principal payments from July 2020 through to December 2020, with principal payments reinstated beginning in January 2021. However, in March 2021, the borrower requested further relief and a second deferral of principal was granted from April 2021 to March 2022. All deferred amounts from both relief requests are to be repaid in monthly installments that will be added to the scheduled monthly payments between April 2022 and March 2027. According to the YE2020 operating statement, the occupancy, average daily rate (ADR), and revenue per available room (RevPAR) figures were reported at 43.8%, $113.21, and $59.62, respectively. Although the borrower was only required to make interest-only (IO) payments for the majority of 2020, it is noteworthy that the loan was kept current with a trailing 12 month ended September 2020 DSCR of 1.34 times (x). The repayment period for the deferred principal will not begin until the spring of 2022, providing some time for the hotel’s performance to further rebound, benefitting from its proximity to the airport. The loan also benefits from the full recourse structure.

The second-largest loan on the servicer’s watchlist, Chateau Versailles (Prospectus ID#23, 1.3% of the pool balance), is secured by a 65-room limited service hotel in Montréal. The loan was added to the servicer’s watchlist in May 2021 due to a low DSCR of -1.39x at YE2020. As of a Q1 2021 summary, the occupancy, ADR, and RevPAR were reported at 6.2%, $82.56, and $5.14, respectively, while recent online searches show rooms available for approximately $115 per night. While the property continues to battle the ongoing challenges presented by the Coronavirus Disease (COVID-19) pandemic, it is noteworthy that the borrower has kept the loan current and no relief request has been made to date. The loan benefits from a full recourse structure and the collateral hotel is well located by McGill University and Concordia University as well as various tourist attractions.

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

-- Prospectus ID#9 – Quality Hotel Dorval (3.5% of the pool)
-- Prospectus ID#23 – Chateau Versailles (1.3% 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 26, 2021), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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 [email protected].

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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