Fitch to Rate REAL-T, Series 2015-2; Presale Issued

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has issued a presale report on Real Estate Asset Liquidity Trust's (REAL-T) commercial mortgage pass-through certificates, series 2015-2.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

--$180,162,000 class A-1 'AAAsf'; Outlook Stable;

--$146,865,000 class A-2 'AAAsf'; Outlook Stable;

--$9,452,000 class B 'AAsf'; Outlook Stable;

--$10,869,000 class C 'Asf'; Outlook Stable;

--$10,870,000 class D 'BBBsf'; Outlook Stable;

--$4,726,000 class E 'BBB-sf'; Outlook Stable;

--$3,780,000 class F 'BBsf'; Outlook Stable;

--$3,781,000 class G 'Bsf'; Outlook Stable.

All currencies are in Canadian dollars (CAD).

Fitch does not expect to rate the $378,066,883 (notional balance) interest-only class X or the non-offered $7,561,883 class H certificate.

The certificates represent the beneficial ownership in the trust, primary assets of which are 41 loans secured by 47 commercial properties located in Canada having an aggregate principal balance of approximately $378.1 million as of the cutoff date. The loans were originated or acquired by Royal Bank of Canada and IMC Limited Partnership.

Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 73.5% 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 106%, and a Fitch debt yield of 8.84%. Fitch's aggregate net cash flow represents a variance of 3.2% to issuer cash flows.

KEY RATING DRIVERS

Fitch Leverage: The pool has a Fitch DSCR and LTV of 1.15x and 106%, respectively. This represents similar leverage as the 2014 average for Canadian multiborrower deals, which had a DSCR and LTV of 1.13x and 104.8%, respectively.

Significant Amortization: The pool has a weighted average amortization term of 26.8 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 24.2% of the closing balance, which represents significantly more paydown than the respective 2014 averages for Canadian and U.S. multiborrower deals of 16.6% and 12%.

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 Research on 'Canadian CMBS Default and Loss Study,' dated October 2013, available on Fitch's website at www.fitchratings.com.

Loans with Recourse: Of the pool, 64.2% of the loans feature full or partial recourse to the borrowers and/or sponsors, which is in line with the 63% from the recent IMSCI 2015-6 transaction, but below the 82.6% from the REAL-T 2015-1 transaction. In Fitch's analysis, the probability of default is reduced for loans with recourse.

RATING SENSITIVITIES

For this transaction, Fitch's net cash flow (NCF) was 10.9% below the most recent year's net operating income (NOI; for properties for which a full-year NOI was provided, excluding properties that were stabilizing during this period). The following rating sensitivities describe how the ratings would react to further NCF declines below Fitch's NCF. The implied rating sensitivities are only indicative of some of the potential outcomes and do not consider other risk factors to which the transaction is exposed. Stressing additional risk factors may result in different outcomes. Furthermore, the implied ratings, after the further NCF stresses are applied, are more akin to what the ratings would be at deal issuance had those further stressed NCFs been in place at that time.

Fitch evaluated the sensitivity of the ratings assigned to REAL-T 2015-2 certificates and found that the transaction displays average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'A+sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BBBsf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 10.

DUE DILIGENCE USAGE

Fitch was provided with third-party due diligence information from Deloitte LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.

Additional information is available at www.fitchratings.com.

REAL-T 2015-2https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871211

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 28 May 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865499

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Related Research

REAL-T 2015-2 Appendixhttps://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871321

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992194

ABS Due Diligence Form 15E 1https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=992194&flm_nm=15e_992194_1.pdf

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992194

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151013006353/en/

Fitch Ratings
Primary Analyst:
Gregg Katz, +1-312-606-2343
Senior Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Secondary Analyst:
Robert Ritter, +1-212-908-0328
Analyst
or
Committee Chairperson:
Robert Vrchota, +1-312-368-3336
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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