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

DBRS Limited (DBRS) confirmed all classes of 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)

All trends are Stable.

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 September 2018 remittance, 37 loans remain in the pool with an aggregate principal balance of $326.9 million, representing a collateral reduction of 7.2% since issuance as a result of the unscheduled repayment of one loan and scheduled loan amortization. At issuance, the transaction had a weighted-average (WA) DBRS Term Debt Service Coverage Ratio (DSCR) and DBRS Debt Yield of 1.47 times (x) and 9.2%, respectively. To date, only 17 loans, representing 38.9% of the pool, have reported YE2017 financials, with a WA DSCR and debt yield of 1.69x and 10.9%, respectively.

The transaction benefits from properties located in urban (38.9% of the pool) and suburban (55.3% of the pool) markets. Additionally, 11 loans (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 (37.6% of the pool) are secured by retail properties, 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 ten and top 15 loans represent 50.0% and 64.7% of the pool, respectively.

As of the September 2018 remittance, there were three loans, representing 11.0% of the pool, on the servicer’s watchlist. The largest loan, Portage Place (Prospectus ID #1, 7.9% of the pool), was flagged as the loan was 30 to 59 days delinquent, although the loan has been made current with the October 2018 remittance. The second-largest loan, 4000 Innovation (Prospectus ID #18, 2.4% of the pool), is cross-collateralized and cross-defaulted with 5050 Innovation (Prospectus ID #9, 3.4% of the pool) and has been flagged as a result of the departure of its sole tenant. The remaining loan, Kamloops Retail (Prospectus ID #38, 0.6% of the pool), was flagged due to a decline in performance, driven by a period of elevated vacancy. For additional information on these loans, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

Class X is interest-only (IO) certificates that reference multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Portage Place
-- 5050 Innovation
-- 4000 Innovation
-- Kamloops Retail

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS-rated transactions.

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

The principal methodology is North American CMBS 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.

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 under Related Documents or by contacting us at info@dbrs.com.

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

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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