Press Release

DBRS Morningstar Maintains the Under Review with Negative Implications Status of Five Classes of Institutional Mortgage Securities Canada Inc., 2012-2

CMBS
September 18, 2020

DBRS Limited (DBRS Morningstar) maintained the Under Review with Negative Implication status on the following classes of Commercial Mortgage Pass-Through Certificates Series 2012-2 issued by Institutional Mortgage Securities Canada Inc., 2012-2:

-- Class XC at A (sf), Under Review with Negative Implications
-- Class D at BBB (high) (sf), Under Review with Negative Implications
-- Class E at BBB (low) (sf), Under Review with Negative Implications
-- Class F at BB (low) (sf), Under Review with Negative Implications
-- Class G at B (low) (sf), Under Review with Negative Implications

These ratings do not carry trends.

These rating actions are reflective of the uncertainty surrounding the resolution of the Centre 1000 loan (Prospectus ID#7; 9.0% of the pool), which remains in special servicing after the loan’s sponsor, Strategic Group LLC, submitted an application filing in December 2019 under Canada’s Companies’ Creditors Arrangement Act (CCAA) that affected the property and 49 others within the sponsor’s 171-property portfolio. The interim receiver assigned at the time of the CCAA proceedings was recently replaced by Trillium Property Group, and the property manager is now Jones Lang LaSalle.

Given the sharp declines in cash flow for the collateral property over the last several years, difficult market conditions for office properties from both a tenant- and investor-demand perspective, and the general stress on the Canadian economy amid the Coronavirus Disease (COVID-19) pandemic, the risks for this loan have significantly increased from issuance. There is a partial-recourse guarantee in the amount of $3.1 million in place to Riaz Mamdani, the guarantor and indemnitor, who indirectly controls the borrowing entity, Centre 1000 LP. However, DBRS Morningstar believes the servicer’s ability to enforce recourse provisions may be limited amid the economic difficulties for the guarantor.

DBRS Morningstar also continues to monitor the increased risks for another Alberta loan in Lakewood Apartments (Prospectus ID#3; 10.4% of the pool), which is secured by a multifamily property in Fort McMurray, Alberta. The borrower recently requested payment relief due to the increased stress on oil markets amid the pandemic, and the servicer has confirmed that an approval for a loan modification to allow for interest-only (IO) payments for the period between April 2020 and August 2020 has been granted. The terms of the modification also defer principal paydowns structured as part of a previous loan modification to extend the maturity date through the end of the IO period. Given these latest developments and the most recent difficulties for oil markets that could persist through a larger economic downturn, the subject loan has been placed on the DBRS Morningstar Hotlist and will be monitored closely for developments.

DBRS Morningstar also notes two additional loans—Mont-Tremblant Retail (Prospectus ID#9; 7.9% of the pool) and Lachenaie Retail (Prospectus ID#11; 6.3% of the pool)—have both undergone loan modifications as a result of effects amid the coronavirus pandemic. The Mont-Tremblant Retail loan was brought current as of August 2020 and is now structured with IO payments from September 2021 to April 2022. The borrower for the Lachenaie Retail loan has made no additional requests for relief and will have six months to pay off the deferred payment amounts before returning to regular principal and interest payments.

As information (e.g., updated property-level financials, rent rolls, new valuations for specially serviced loans, and workout and/or modification specifics) becomes available, DBRS Morningstar will address the Under Review with Negative Implication rating actions over the near to moderate term. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period, but the circumstances surrounding these rating actions may result in a prolonged resolution period.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

Classes XC is an IO certificate that references a single rated tranche or 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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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@dbrsmorningstar.com.

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

This rating is Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

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

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Ratings

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