DBRS Confirms Ratings of Institutional Mortgage Securities Canada Inc., Series 2013-3

DBRS Limited (DBRS) has today confirmed the ratings of the following Commercial Mortgage Pass-Through Certificates, Series 2013-3 issued by IMSCI 2013-3:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 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 X at AAA (sf)

All trends are Stable.

The rating confirmations reflect the overall stability of the pool, which has experienced a collateral reduction of 4.7% since issuance as a result of scheduled loan amortization. At issuance, the pool consisted of 38 fixed-rate loans secured by 43 commercial properties. As of the March 2015 remittance, all of the original 38 loans remain in the pool, with an aggregate outstanding principal balance of $238.5 million. The top 15 loans continue to exhibit stable performance with a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.59 times (x) and 9.3%, respectively. There are no delinquent or specially serviced loans as of the March 2015 remittance. However, there is one loan on the servicer’s watchlist which is highlighted below.

Sherbrooke Street Office (Prospectus ID#6, representing 4.1% of the current pool balance) is secured by a Class B office building located in the Le Plateau-Mont-Royal borough of Montréal. The loan was added to the servicer’s watchlist as a result of an upcoming lease expiration for the largest tenant at the property, representing 32.2% of the net rentable area (NRA). According to the March 2014 rent roll, the property was 94.4% occupied and the largest tenant, Aro Inc., occupied its space on a lease initially scheduled to expire in May 2018. However, the servicer confirmed that the tenant will be exercising its early termination option and vacating the premises in May 2015. The borrower has identified a potential replacement tenant to assume a portion of the space being vacated by Aro Inc. and is finalizing negotiations for a five-year lease commencing in June 2015. Another major tenant at the property is Conservatoire Lassalle, which represents 14.3% of the NRA and has a lease scheduled to expire in May 2015. DBRS has followed up with the servicer regarding a leasing update for this tenant. The loan was modeled with an elevated probability of default to reflect the anticipated cash flow decline following the largest tenant’s departure. The loan benefits from full recourse to an experienced sponsor with a large portfolio of commercial real estate, specializing in Québec markets.

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 and the loan on the servicer’s watchlist. The March 2015 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:
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 American CMBS Surveillance (January 2015), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.