DBRS Confirms Ratings on Institutional Mortgage Securities Canada Inc., Series 2016-7

DBRS Limited (DBRS) confirmed the Commercial Mortgage Pass-Through Certificates, Series 2016-7 (the Certificates) issued by Institutional Mortgage Securities Canada Inc., Series 2016-7 (the Issuer) 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 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)

The rating confirmations reflect the overall stable performance exhibited since issuance. At issuance, the collateral consisted of 38 fixed-rate loans secured by 60 commercial properties. As of the October 2017 remittance, 37 loans remained in the pool with an aggregate principal balance of $334.7 million, representing a collateral reduction of 5.0% since issuance as a result of the unscheduled repayment of one loan and scheduled loan amortization. To date, only 18 loans, representing 35.2% of the pool, have reported updated financials since issuance. Because of the late 2016 securitization, updated financial reporting for all loans is not expected until March or April 2018. At issuance, the transaction had a DBRS Term DSCR and DBRS Debt Yield of 1.47 times and 9.2%, respectively.

The transaction benefits from properties located in urban (46.8% of the pool) and suburban (30.0% of the pool) markets. Additionally, 11 loans, representing 36.3% of the pool, have either full or partial recourse to their respective sponsors. The pool is concentrated by property type, as 12 loans, representing 37.6% of the pool, are secured by retail properties, while nine loans (25.8% of the pool) are secured by industrial properties and five loans (12.8% of the pool) are secured by multifamily properties. The pool is also concentrated by loan size, as the Top 10 and Top 15 loans represent 49.9% and 64.6% of the pool, respectively.

As of the October 2017 remittance, there are two loans, representing 3.4% of the pool, on the servicer watchlist. The larger of the two loans, 4000 Innovation (2.4% of the pool), was flagged as a result of the departure of its sole tenant, while the smaller loan, Spence Apartment (1.0% of the pool), was flagged due to a decline in performance, driven by scheduled renovations.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans in the transaction, as well as the Top 10 loans where updated performance information from issuance was available, in the DBRS Viewpoint 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 into DBRS Viewpoint at viewpoint.dbrs.com.

Class X is an interest-only (IO) certificate that references multiple rated tranches. The rating assigned to Class X materially deviates from the lower rating 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 deviation for Class X is warranted, as consideration was given for actual loan, transaction and sector performance where a rating based on the lowest rated notional class may not reflect the observed risk.

Notes:
All figures are in Canadian 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.

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

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