DBRS Confirms Ratings of Institutional Mortgage Securities Canada Inc., 2012-2

DBRS has today confirmed the ratings of Institutional Mortgage Securities Canada Inc., 2012-2 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
-- Class XP at AAA (sf)
-- Class XC at AAA (sf)

All trends are Stable.

The collateral for the transaction consists of 31 fixed-rate loans secured by 33 properties. The properties are located throughout eight provinces in Canada with the highest concentration in Ontario and Alberta, at 29.8% and 22.0% of the pool balance, respectively. As of the July 2013 remittance report, the pool has a balance of approximately $235.4 million, representing a collateral reduction of 2.0% since issuance. The transaction also benefits from the majority of the underlying loans being structured with original amortization schedules of 25 years. The total expected amortization for the pool is approximately 18% during the expected life of the transaction.

As of the July 2013 remittance report, there are no loans on the servicer’s watchlist and there are no delinquent or specially serviced loans; however, according to the servicer, Prospectus ID #5, Evton Office was added to the watchlist after the release of the July remittance report and this will be reflected in the August 2013 remittance report. The loan is secured by an eight-storey Class B office building located in Midtown Toronto. The property will be added to the watchlist for a decline in occupancy as a result of the largest tenant and an additional smaller tenant vacating the property late in 2012, which caused occupancy to decline from 90.5% at issuance to 66.9% in December 2012. The lease expiry date of the previous large tenant was contemplated at issuance and as such, the loan was structured with an upfront TI/LC reserve of $274,650 to cover re-tenanting the space. Additionally, according to the listing agent’s website, the property has had a recent uptick in leasing activity. DBRS has requested updated leasing information and rent roll from the servicer to verify if any leasing activity has taken place. DBRS will continue to monitor the loan and will provide more information when available.

The DBRS analysis included an in-depth review of the 15 largest loans in the transaction, which represents approximately 75.5% of the current pool balance. Due to volatility in net cash flow a year out from origination, the DBRS underwriting net cash flow from issuance were applied during the modeling process, where applicable.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction including details on the largest loans in the pool. The July 2013 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North America Surveillance Methodology (November 2012), which can be found on our website under Methodologies.