DBRS Morningstar Confirms Ratings on All Classes of Institutional Mortgage Securities Canada Inc., Series 2016-7

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-7 issued by Institutional Mortgage Securities Canada Inc., Series 2016-7 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (high) (sf)
-- Class X at A (high) (sf)
-- Class D at BBB (high) (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 continued overall stable performance of the transaction. As of December 2020, the transaction consists of 36 loans totaling $300.6 million. Two of the original 38 loans have been repaid, resulting in collateral reduction of 14.7%, including loan repayments and amortization. The transaction benefits from a concentration of industrial collateral as nine loans, representing 26.2% of the pool, are secured by industrial properties, which have shown greater resilience to cash flow declines during the Coronavirus Disease (COVID-19) pandemic. This includes the second-largest loan in the transaction, which is secured by an industrial property in Montréal, Boivin Industrial (Prospectus ID#2; 6.3% of the pool). The transaction also includes nine loans secured by multifamily and self-storage properties, representing 17.1% of the pool. Additionally, one loan, representing 5.1% of the pool, is secured by defeasance collateral.

The transaction has exposure to retail and hotel properties, which the coronavirus pandemic has disproportionately affected. Combined, these loans represent 35.9% of the pool, including the largest loan in the transaction. As of December 2020, six loans, representing 17.3% of the pool, were on the servicer’s watchlist. The largest loan on the servicer’s watchlist, Portage Place (Prospectus ID#1; 8.2% of the pool), was added to the watchlist following the servicer’s approval of a modification to allow two three-month forbearance periods spanning May 2020 to October 2020. During the forbearance period, principal was deferred and the borrower began paying amortizing debt service payments in November 2020. The deferred principal will be paid in equal installments over a nine-month period. The second-largest loan on the servicer’s watchlist, Hilton Mississauga Meadowvale (Prospectus ID#8; 3.7% of the pool), is also being monitored for a forbearance, which was granted from September 2020 to November 2020 and allowed for a deferment of principal through that period. The borrower began paying amortizing debt service payments beginning in December 2020 and will pay the forborne principal over a six-month 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.

Class X is an interest-only (IO) certificate that references 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Portage Place (8.2% of the pool)
-- Prospectus ID#8 – Hilton Mississauga Meadowvale (3.7% of the pool)
-- Prospectus ID#13 – Duke of Devonshire (3.0% of the pool)

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 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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