DBRS Confirms All Classes of Canadian Commercial Mortgage Origination Trust 2012-1

DBRS has today confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2012-1 issued by Canadian Commercial Mortgage Origination Trust 2012-1, as follows:

-- Class A at AAA (sf)
-- Class X 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)

The trends on all classes are Stable.

The pool consists of 25 loans secured by 26 properties. As of the September 2014 remittance, the pool has experienced collateral reduction of 3.92% since issuance as a result of amortization. According to YE2013 reporting, the top 15 loans have experienced a net cash flow growth of 3.21% over the DBRS underwritten (UW) figures. The weighted-average debt service coverage ratio (DSCR) for the top 15 loans was 1.66 times (x) for the same time period.

The pool is concentrated by loan size, as the largest two loans represent 26.8% of the current pool balance and the top 15 loans represent 85.1% of the current pool balance. As of the September 2014 remittance, there are five loans on the servicer’s watchlist, representing 22.9% of the current pool balance. Of these, only two have been flagged for performance decline. While there is one loan on the servicer’s watchlist that is not backed by a recourse guaranty, the vast majority of the pool has full or partial recourse, and eight loans, representing 35.2% of the current pool balance, are sponsored by DBRS-rated entities. The pool also benefits from a relatively tight amortization schedule. Over half of the current pool balance amortizes on a schedule of 25 years or less.

The largest loan on the servicer’s watchlist reporting a performance decline is Dundee Grande Allee Office (Prospectus ID#10, 4.59% of the current pool balance). The loan is secured by a multi-tenant Class B office building in Québec City, Québec. The servicer has placed the loan on the watchlist as a result of a low DSCR, which was reported to be 1.02x at YE2013. The DBRS UW DSCR was 1.10x and the Issuer’s UW DSCR was 1.28x. Leases representing 28.2% of the net rentable area (NRA) have expired since issuance with several tenants opting not to renew, elevating the subject’s vacancy to 35.0%, per the Dream Office Real Estate Investment Trust (REIT) website. At issuance, the property was 18.0% vacant. Leases representing an additional 24.9% of the NRA are scheduled to expire in 2015. The subject is well located along a primary corridor and benefits from strong sponsorship as the loan is full recourse to Dream Office REIT, formerly known as Dundee REIT. Dream Office REIT is currently rated BBB (low) by DBRS. DBRS will continue to monitor the loan for any further cash flow deterioration.

DBRS is also monitoring Kensington Crossing (Prospectus ID#12, 4.15% of the current pool balance), which is on the servicer’s watchlist for fire damage to the property sustained in late 2012. The non-recourse loan is secured by an anchored retail property in Edmonton, Alberta. The incident, which occurred on December 25, 2012, affected approximately 50.7% of the NRA and displaced eight tenants, including the second- and third-largest tenants, Dollarama (13.4% of NRA) and Bonanza Western Grill (11.9% of NRA). According to a news release on September 22, 2014, by the borrower, the exterior reconstruction process is nearing completion and interior finishes are scheduled to follow. The entire reconstruction process on the spaces affected by the fire is scheduled for completion in November 2014. The property is currently receiving full business interruption proceeds and the YE2013 DSCR was reported to be 1.35x, which is flat from the DBRS UW figure.

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 remaining loans in the pool. The September 2014 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.

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

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