Morningstar DBRS Confirms All Credit Ratings of Real Estate Asset Liquidity Trust, Series 2015-1

DBRS Limited (Morningstar DBRS) confirmed all credit ratings on the classes of Commercial Mortgage Pass-Through Certificates, Series 2015-1 issued by Real Estate Asset Liquidity Trust, Series 2015-1 as follows:

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

All trends are Stable.

The credit rating confirmations are reflective of the pool's overall stable performance, which remains in line with Morningstar DBRS' expectations. Since the last credit rating action, two loans were repaid in full, bringing the pool's total collateral reduction to 44.9% as of the July 2024 remittance. There remain no delinquent or specially serviced loans, with six loans, representing 28.6% of the pool, on the servicer's watchlist. Four of the six loans are being monitored for upcoming loan maturities within the next 90 days, all of which exhibit strong credit characteristics and are expected to repay in full. The remaining two loans, including the largest loan, Alta Vista Manor Retirement Ottawa (Prospectus ID#1, 12.1% of the pool), are being monitored for low debt service coverage ratio (DSCR).

As of the July 2024 remittance, 30 of the original 46 loans remain in the pool with an aggregate principal balance of $184.6 million, representing a collateral reduction of 44.9% since issuance as a result of loan amortization and loan repayment. Additionally, one loan, representing 11.9% of the current pool balance, is fully defeased. By property type, the pool is most heavily concentrated in loans secured by retail, multifamily/retirement, and lodging properties, representing 32.1%, 17.5%, and 10.7% of the current pool, respectively. The pool benefits from minimal exposure to loans secured by office collateral, with just one loan, representing 8.4% of the pool. The Place D'Armes Office Kingston loan (Prospectus ID#5, 8.5% of the pool) is secured by an office property in Kingston, Ontario, that is 100% occupied by the Ministry of the Attorney General and the Ministry of Health and Long-Term Care, which are both branches of the Ontario provincial government (rated AA with a Stable trend by Morningstar DBRS). The tenants have been in occupancy since property construction and are signed to a lease scheduled to expire in September 2025, with three five-year extension options.

The largest loan on the watchlist, Alta Vista Manor Retirement Ottawa, is secured by a 174-unit luxury senior housing retirement residence in Ottawa. The property comprises a mix of independent-living and assisted-living units located near the Ottawa Hospital. The loan has been on the servicer's watchlist since May 2018 as a result of declining revenue and a low DSCR. Given the challenging market conditions for senior housing in Ottawa in general, which were further exacerbated by the effects of the coronavirus pandemic, the property experienced a steady decline in occupancy levels and a significant increase in expenses. Occupancy has since increased to 83.5% as of March 2024, up from 68.2% at YE2022, but still below issuance levels of 88.0%, while net cash flow remains negative as of the YE2023 financials.

As of March 2024, the property reported an average rental rate of $3,439 per unit, an increase from YE2022 average rents of $3,191 per unit, but still well below the average rental rate of $4,270 per unit at issuance. According to Cushman & Wakefield's 2023 Senior Housing Operating Performance report, properties in the Ottawa market reported a median vacancy of 19.9% and median rental rate of $4,657 per unit as of September 2023, improvements from the YE2022 median vacancy and rental rate of 31.5% and $4,581 per unit, respectively. The loan does benefit from full recourse to Regal Lifestyle Communities (now owned by Welltower) and Revera, Inc.; however, given the continued depressed performance and the loan's upcoming March 2025 maturity, Morningstar DBRS analyzed this loan with an elevated probability of default resulting in an expected loss approximately four times higher than the pool expected loss.

At issuance, Morningstar DBRS shadow-rated the U-Haul SAC 3 Portfolio loan as investment grade. The loan is secured by a portfolio of 10 individual loans backed by self-storage properties across Ontario. With this review, Morningstar DBRS has confirmed that the performance of the loan remains consistent with investment-grade loan characteristics.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030 (January 23, 2024).

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

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798)

Other methodologies referenced in this transaction are listed at the end of this press release.

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@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

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

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

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model v 1.2.0.0, https://dbrs.morningstar.com/research/428797
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293
-- North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592
-- Legal Criteria for Canadian Structured Finance (June 20, 2023), https://dbrs.morningstar.com/research/416101

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/410863 (July 17, 2023).

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