DBRS Morningstar Finalizes Provisional Ratings on Real Estate Asset Liquidity Trust, Series 2021-1

DBRS Limited (DBRS Morningstar) finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-1 issued by Real Estate Asset Liquidity Trust, Series 2021-1:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X at AA (high) (sf)
-- Class B at AA (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 79 fixed-rate loans secured by 150 commercial properties. The transaction is a sequential-pay pass-through structure. The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Morningstar Stabilized Net Cash Flow (NCF) and their respective actual constants, the initial DBRS Morningstar Weighted-Average (WA) Debt Service Coverage Ratio (DSCR) for the pool was 1.49 times (x). DBRS Morningstar did not identify any loans as having a DBRS Morningstar Term DSCR below 1.15x, a threshold indicative of a higher likelihood of midterm default. The DBRS Morningstar WA Loan-to-Value (LTV) of the pool at issuance was 65.3%, and the pool is scheduled to amortize down to a DBRS Morningstar WA LTV of 54.6% at maturity.

The pool includes 39 loans, representing 49.4% of the allocated pool balance, that exhibit a DBRS Morningstar LTV ratio in excess of 67.1%, a threshold generally indicative of above-average default frequency. These credit metrics are based on the A-note balances.

Fifty loans, representing 57.3% of the pool, have been given recourse credit in the DBRS Morningstar CMBS Insight model.

Recourse generally results in lower probability of default over the term of the loan. Three loans, representing 7.3% of the pool, were considered by DBRS Morningstar to have Strong sponsor strength. All loans in the pool amortize for the entire loan term. Eighteen loans, representing 13.3% of the pool, have approximately 25 years or less of remaining amortization. The remaining loans have remaining amortization ranges between 25 years and 30 years. The expected amortization for the pool is approximately 16.4% during the expected life of the transaction.

The DBRS Morningstar sample included 26 of the 79 loans in the pool, representing 61.4% of the pool by allocated loan balance. DBRS Morningstar performed site inspections on 67 of the 150 properties in the deal, comprising 39.1% of the pool by allocated loan balance. The DBRS Morningstar sample had an average NCF variance of -6.0% and ranged from -19.2% (Place Val Est) to +1.9% (Cardill Cres Waterloo Multifamily). For loans not subject to an NCF review, DBRS Morningstar applied the average NCF variance.

Based on the DBRS Morningstar sample and analysis, DBRS Morningstar considered two loans (8.9% of the sample or 5.5% of the pool) to have Above Average property quality and seven loans (35.7% of the sample or 21.9% of the pool) to have Average + property quality. Additionally, there is no loan modeled with Below Average property quality.

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 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.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrsmorningstar.com. DBRS Morningstar provides analysis and in-depth commentary in the DBRS Viewpoint platform.

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

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

The principal methodology is North American CMBS Multi-Borrower Rating 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 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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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