DBRS Morningstar Upgrades Five Classes of Real Estate Asset Liquidity Trust, Series 2014-1

DBRS, Inc. (DBRS Morningstar) upgraded five classes of Commercial Mortgage Pass-Through Certificates Series 2014 1 issued by Real Estate Asset Liquidity Trust, 2014-1 as follows:

-- Class C to AAA (sf) from AA (sf)
-- Class X to AAA (sf) from AA (sf)
-- Class D to AA (low) (sf) from A (low) (sf)
-- Class E to A (low) (sf) from BBB (sf)
-- Class F to BBB (sf) from BB (high) (sf)

In addition, DBRS Morningstar confirmed the ratings on the remaining classes in the transaction as listed below:

-- Class A at AAA (sf)
-- Class B to AAA (sf)
-- Class G to B (high) (sf)

All trends are Stable.

The rating upgrades reflect the significant paydown in the deal to date coupled with the overall stable performance of the remaining collateral. As of the December 2021 remittance, eight of the original 34 loans remain in the pool with an aggregate trust balance of $66.8 million, representing collateral reduction of 76.2% as a result of scheduled loan amortization and loan payoffs. The transaction is concentrated by property type as three loans, representing 44.0% of the current trust balance, are secured by retail assets while another three loans, representing 39.0% of the current trust balance, are secured by self-storage properties. The pool is also concentrated by loan size as the three largest loans represent 54.9% of the remaining trust balance. One loan, representing 11.4% of the current trust balance, has been fully defeased. All loans remaining in the pool benefit from some level of material recourse to the loan’s sponsor. The remaining eight loans all mature in 2024.

According to the December 2021 remittance report, no loans are delinquent or in special servicing, but three loans, representing 24.8% of the current trust balance, are on the servicer’s watchlist.

The largest loan in the pool, 1015 Golf Links Road (Prospectus ID#2; 24.8% of the pool), is secured by an 89,236-square foot anchored retail property in Ancaster, Ontario. The borrower fell delinquent on payments between April 2020 and June 2020, but subsequently negotiated a short-term forbearance agreement allowing deferral of those principal payments with repayment to be made over the following six months. A second deferral was subsequently granted, extending the principal deferral to include the payments for July 2020 through September 2020. The cumulative six months of deferrals were repaid between October 2020 and June 2021. The property was 100% occupied as of the April 2021 rent roll. The loan had a debt service coverage ratio (DSCR) of 1.33 times, based on the most recent YE2019 reporting. The loan is full recourse to the borrower and 50% recourse to the loan sponsor, Ron McCowan. The subject is part of a six-property portfolio held by McCowan and Associates Ltd. and is cross-collateralized and cross-defaulted with 320 Yonge Street (Prospectus ID#20) in this pool. At issuance, the collateral for the loan had an appraised value of $27.9 million, equating to a loan-to-value ratio of 69%.

The largest loan on the watchlist is Newmarket Plaza (Prospectus ID#12; 12.1% of the pool), secured by a 69,236-square foot anchored retail property in Newmarket, Ontario. The loan was added to servicer’s watchlist in June 2020 because of a drop in DSCR at YE2019. The cause of the drop in cash flow is unclear as both occupancy and rental rates have remained in line with issuance. The property was 93% occupied as of the March 2021 rent roll with an average rental rate of $20.61 per square foot. The loan is also being monitored for outdated financials. The loan is full recourse to the sponsors, Samuel F. Investments Limited and 275057 Ontario Limited.

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 multiple rated tranches. When determining the rating assigned to Class X, consideration was given for actual loan, transaction, and sector performance where a rating based on the lowest-rated applicable reference obligation may not reflect the observed risk.

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#2 – 1015 Golf Links Road (24.8% 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 .

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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