CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned the following expected ratings and Rating Outlooks to Real Estate Asset Liquidity Trust's (REAL-T) commercial mortgage pass-through certificates, series 2014-1:
--$241,680,000 class A 'AAAsf'; Outlook Stable;
--$7,015,000 class B 'AAsf'; Outlook Stable;
--$9,120,000 class C 'Asf'; Outlook Stable;
--$7,717,000 class D 'BBBsf'; Outlook Stable;
--$3,507,000 class E 'BBB-sf'; Outlook Stable;
--$3,157,000 class F 'BBsf'; Outlook Stable;
--$2,806,000 class G 'Bsf'; Outlook Stable.
All currencies are in Canadian dollars (CAD).
Fitch does not rate the $280,615,596 (notional balance) interest-only class X or the non-offered $5,613,596 class H certificate.
The certificates represent the beneficial ownership in the trust, primary assets of which are 34 loans secured by 46 commercial properties located in Canada having an aggregate principal balance of approximately $280.6 million as of the cutoff date. The loans were originated or acquired by Royal Bank of Canada, IMC Limited Partnership, and Trez Commercial Mortgage Limited Partnership.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 82.9% of the properties by balance, cash flow analysis of 100%, and asset summary reviews on 100% of the pool.
The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.15x, a Fitch stressed loan-to-value (LTV) of 110.2%, and a Fitch debt yield of 9.22%. Fitch's aggregate net cash flow represents a variance of 5.9% to issuer cash flows.
KEY RATING DRIVERS
Canadian Loan Attributes and Historical Performance: The ratings reflect strong historical Canadian commercial real estate loan performance, including a low delinquency rate and low historical losses of less than 0.1%, as well as positive loan attributes, such as short amortization schedules, recourse to the borrower and additional guarantors. For more information on prior Canadian CMBS securitizations, see Fitch's report 'Canadian CMBS Default and Loss Study,' published in October 2013 and available on Fitch's website at 'www.fitchratings.com'.
Fitch Leverage: The pool has a Fitch DSCR and LTV of 1.15x and 110.2%, respectively, which represents slightly higher leverage than recent Canadian multiborrower deals. The IMSCI 2014-5 deal had a Fitch DSCR and LTV of 1.16x and 98.2%, respectively, and the IMSCI 2013-4 deal had a Fitch DSCR and LTV of 1.16x and 100.2%, respectively. The leverage is slightly higher than the first-half 2014 average for U.S. CMBS, which had an LTV of 105.6%.
Amortization: The pool has a weighted average amortization term of 26.7 years, which represents faster amortization than U.S. conduit loans. There are no partial or full interest-only loans. The pool's maturity balance represents a paydown of 16.3% of the closing balance.
Sponsor Concentration: Approximately 20% of the pool is sponsored by one of three REITs managed by Skyline Wealth Management Inc.
Fitch performed two model-based break-even analyses to determine the level of cash flow and value deterioration the pool could withstand prior to $1 of loss being experienced by the 'BBB-sf' and 'AAAsf' rated classes. Fitch found that the REAL-T 2014-1 pool could withstand a 41.3% decline in value (based on appraised values at issuance) and an approximately 12.1% decrease to the most recent actual cash flow prior to experiencing a $1 of loss to the 'BBB-sf' rated class. Additionally, Fitch found that the pool could withstand a 47.3% decline in value and an approximately 21% decrease in the most recent actual cash flow prior to experiencing $1 of loss to any 'AAAsf' rated class.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying transaction report.
The master and special servicer is First National Financial LP, which is unrated by Fitch. However, Fitch performed a limited scope review which included a discussion with management, and has begun the full servicer review process. Fitch views FNFC as acceptable to serve as servicer for the transaction.
The presale report is available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions' (June 2014);
--'Global Structured Finance Rating Criteria' (August 2014);
--'Counterparty Criteria for Structured Finance Transactions and Covered Bonds' (May 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (December 2013);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (September 2014).
Applicable Criteria and Related Research: REAL-T 2014-1 (Canada CMBS)
Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions
Global Structured Finance Rating Criteria
Counterparty Criteria for Structured Finance and Covered Bonds
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions