Morningstar DBRS Finalizes Provisional Credit Ratings on Real Estate Asset Liquidity Trust, Series 2025-1

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2025-1 (the Certificates) issued by Real Estate Asset Liquidity Trust, Series 2025-1 (the Trust):

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class X at AA (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 collateral consists of 70 fixed-rate loans, including one pari passu pooled interest, secured by 102 commercial properties with an aggregate cut-off date balance of $507.6 million. The transaction is a sequential-pay pass-through structure. The loan pool was analyzed to determine the provisional credit ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity.

The collateral pool has an issuance Morningstar DBRS WA LTV of 64.9% and scheduled amortization to a Morningstar DBRS Balloon LTV of 58.1%. When the cut-off loan balances were measured against the Morningstar DBRS Stabilized NCF and their respective actual constants, the initial Morningstar DBRS WA DSCR for the pool was 1.74x. Thirty-two loans, representing 40.8% of allocated pool balance, exhibit a Morningstar DBRS Issuance LTV in excess of 67.1%, a threshold generally indicative of higher-than-average default frequency. However, only one loan, representing 0.4% of the allocated pool balance, exhibits an Issuer Term DSCR below 1.25x, a threshold indicative of a higher likelihood of midterm default. Sixty-six loans, representing 81.2% of the allocated pool balance, have been given full or partial recourse credit in the Morningstar DBRS CMBS Insight model because of some form of recourse to individuals and REITs or established corporations. Recourse generally results in lower POD over the term of the loan. While it is generally difficult to quantify the impact of recourse, all else being equal, there is a small shift lowering the loan's POD for warm-body or corporate sponsors that give recourse. Recourse can also serve as a mitigating factor to other risks, such as single-tenant risk, by providing an extra incentive for the loan sponsor to make debt service payments if the sole tenant vacates.

The Morningstar DBRS sample included 23 of the 70 loans in the pool. Site inspections were performed on nine of the loans, or 13 of the 102 properties in the transaction (31.8% of the pool by allocated loan balance). Morningstar DBRS conducted meetings with the on-site property manager, leasing agent, or a representative of the borrowing entity for seven loans, representing 30.2% of the pool.

Morningstar DBRS' credit rating on the Certificates addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Distribution Amounts and/or Interest Distribution Amounts for the rated classes.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, Prepayment Premiums.

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 factor(s) 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 Factors in Credit Ratings at (August 13, 2024): https://dbrs.morningstar.com/research/437781

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 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 Multi-Borrower Rating Methodology (December 13, 2024): https://dbrs.morningstar.com/research/444616

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

With regard to due diligence services, Morningstar 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 Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

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, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

-- Legal and Derivatives Criteria for Canadian Structured Finance (August 12, 2024), https://dbrs.morningstar.com/research/437761
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American CMBS Insight Model v 1.2.0.0, https://dbrs.morningstar.com/research/444616

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