DBRS Morningstar Confirms Ratings on All Classes of Institutional Mortgage Securities Canada Inc., Series 2014-5

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-5 issued by Institutional Mortgage Securities Canada Inc., Series 2014-5 as follows:

-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (sf)
-- Class X at AA (sf)
-- Class D at A (high) (sf)
-- Class E at A (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance, when the transaction consisted of 41 fixed-rate loans secured by 55 commercial and multifamily properties. The initial trust balance of $311.8 million has been reduced to $86.6 million as of the January 2021 remittance, with 11 of the original 41 loans remaining in the pool. The transaction is concentrated by property type as four loans, representing 54.5% of the current trust balance, are secured by retail collateral; self-storage properties back the second-largest concentration of loans, with three loans representing 25.6% of the current trust balance. As of the January 2021 remittance, two loans, representing 30.0% of the pool, are on the servicer’s watchlist, with no loans in special servicing.

The largest loan in the pool, Milton Crossroads West (Prospectus ID#1, 23.6% of the pool), was added to the servicer’s watchlist following the borrower’s request for Coronavirus Disease (COVID-19) pandemic–related relief. The collateral is a 103,400-square-foot (sf) retail center in Milton, Ontario, part of a larger development consisting of approximately 475,000 sf of noncollateral space with shadow anchors in Walmart, Canadian Tire, and Staples. At the time of the borrower’s relief request, 13 of the 16 collateral tenants had advised of anticipated difficulties paying rent.

The servicer granted relief in the form of a deferral of principal payments from June 2020 through August 2020, with the scheduled interest still due through that period. As of the July 2020 remittance, the loan was listed as 30 to 59 days delinquent but was brought current with the finalization of the forbearance agreement and has remained current since, with repayment of deferred principal commencing in September 2020.

The second-largest loan on the servicer’s watchlist is Nelson Ridge Pooled Loan (Prospectus ID#17, 6.5% of the pool), which is part of a pari passu whole loan secured by a multifamily property in Fort McMurray, Alberta. The loan is also on the DBRS Morningstar Hotlist. Historically, because of the sustained difficulties in the local economy, the property has shown significant performance declines since issuance. The loan was previously transferred to special servicing for imminent default in February 2016 and was later returned to the master servicer as a corrected loan in late January 2017 after the borrower brought the loan current. The servicer also granted a forbearance agreement to extend the maturity date from December 2019 to December 2021, subject to additional periodic principal lump sum payments, which were satisfied.

The loan sponsor, Lanesborough Real Estate Investment Trust, which provides 100% recourse, continues to fund debt service shortfalls out of pocket and has remained cooperative with the servicer throughout the previous two transfers to special servicing. The loan is also 100% guaranteed by both 2668921 Manitoba Ltd. (Manitoba) and Shelter Canadian Properties Ltd., the parent company of Manitoba. In May 2020, the borrower requested debt relief because of coronavirus-related disruptions and was granted interest-only payments from April 2020 to August 2020, with those deferred amounts to be paid at maturity in December 2021.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Class X is an interest-only (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.

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

-- Prospectus ID#1 – Milton Crossroads West (23.6% of the pool)
-- Prospectus ID#17 – Nelson Ridge Pooled Loan (6.5% 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 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 [email protected].

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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577