DBRS Confirms Ratings of Canadian Commercial Mortgage Origination Trust 2012-1

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

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)

All trends are Stable, with the exception of Classes F and G which carry a Negative trend that has been maintained to reflect concerns regarding declining performance of the largest loan in the pool, the Centre RioCan Kirkland loan (18.4% of the current pool balance) and the near-term maturity of all remaining loans in the pool.

The rating confirmations reflect the overall stable performance of the transaction. At issuance, the collateral for this transaction consisted of 25 fixed-rate loans secured by 26 properties with an issuance trust balance of $248.5 million. All loans in the pool were structured with five-year terms and are scheduled to mature in 2017. As of the July 2017 remittance, eight loans representing 20.1% of the issuance pool balance have been repaid, contributing to a principal paydown of $71.4 million in conjunction with scheduled loan amortization. As a result, the pool has experienced a collateral reduction of 28.8% since issuance with 17 loans remaining in the pool and an outstanding aggregate balance of $177.1 million. All remaining loans are scheduled to mature by December 2017, with seven loans, representing 23.4% of the current pool balance, scheduled to mature in August 2017. Four loans, representing 34.7% of the current pool balance, including the two largest loans in the pool, are scheduled to mature in October 2017. The pool benefits from recourse guarantees on all but one of the remaining loans in the pool. Historically, the Canadian commercial mortgage-backed security (CMBS) delinquency rate has remained relatively low and borrowers that have provided partial or full recourse guarantees to their respective loans have exhibited a higher likelihood to obtain replacement financing at maturity than loans with no recourse guarantee.

The remaining top ten loans have exhibited stable performance since issuance as seven loans, representing 47.1% of the pool, reported strong net cash flow (NCF) growth of 29.8% over the DBRS issuance figures and NCF growth of 13.6% year over year, according to the most recent year-end reporting period available.

As of the July 2017 remittance, there are 12 loans representing 59.1% of the pool balance on the servicer’s watchlist. All 12 loans are being monitored for upcoming maturities, while two loans representing 21.0% of the pool balance are also being monitored for low occupancy.

The ratings assigned to Classes A, B, C, D, E and F materially deviate from the lower ratings implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted as a result of the uncertain loan level event risk.

The rating assigned to Class X materially deviates from the lower ratings implied by the quantitive results. Consideration was given for the actual loan, transaction and sector performance where a rating based on the lowest rated notional class may not reflect the observed risk.

DBRS has provided updated loan-level commentary and analysis for the larger and/or pivotal watchlisted loans, as well as for the largest 10 loans in the pool, in the DBRS CMBS IReports platform. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register or log in at www.ireports.dbrs.com

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The principal methodologies are North American CMBS Multi-borrower Rating Methodology (March 2017) and CMBS North American Surveillance (March 2017), which can be found on www.dbrs.com under Methodologies.