DBRS Morningstar Confirms Ratings on All Classes of Real Estate Asset Liquidity Trust, Series 2020-1

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-1 issued by Real Estate Asset Liquidity Trust, Series 2020-1 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.

The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the November 2021 remittance, all 52 of the original loans remain in the pool, with collateral reduction of 3.6% as a result of scheduled loan amortization. Retail and multifamily properties are the two largest property types in the pool, collectively comprising more than 60.0% of the pool balance.

Per the November 2021 remittance, there are no loans in special servicing and six loans, representing 22.0% of the current pool balance, including three of the top 10 largest loans, on the servicer’s watchlist. A majority of these loans have been affected by the ongoing difficulties caused by the Coronavirus Disease (COVID-19) pandemic. However, performance improvements are expected within the next the next year as restrictions are lifted and the economy continues to recover.

The largest loan on the watchlist is Sheraton Gateway Hotel Toronto A1 (Prospectus ID#1, 8.2% of the pool), secured by a 474-room hotel located at Terminal 3 of the Toronto Pearson International Airport in Mississauga, Ontario. The loan was added to the servicer’s watchlist in May 2020 after coronavirus relief was requested. The loan has since been modified twice with terms allowing the borrower to use capex reserves for payment of principal and interest for five months from May 2020 to September 2020. The modification terms were subsequently extended until March 2021. The capex reserve is required to be replenished in 24 months starting April 2021. The loan reported $9.9 million in capital improvement reserves as of the November 2021 remittance.

The Globe and Mail in November 2021 reported that the renovations at the property are nearly finalized with an estimated completion date in 2022. At issuance, the subject’s occupancy rate of 85.5% was higher than the average competitive set occupancy of 78.4%. The subject’s average daily rate and revenue per available room have been outperforming the competitive set and the subject has ranked number one for three years in a row among the six assets comprising the competitive set.

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.

Classes 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.

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

-- Prospectus ID#1 – Sheraton Gateway Hotel Toronto A1 (8.2% 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 the 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 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.

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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