Morningstar DBRS Upgrades First Loss Credit Rating on One Transaction and Confirms First Loss Credit Ratings on Eight Mortgage Loan Transactions

DBRS, Inc. (Morningstar DBRS) conducted its surveillance review of nine mortgage loan transactions, comprising 12 loans, as discussed in greater detail below. With this review, Morningstar DBRS upgraded the first loss credit ratings assigned to one transaction, comprising two loans, and confirmed the first loss credit ratings assigned to eight transactions, comprising 10 loans. The credit rating actions generally reflect the overall stable to improving performance of each loan since the last credit rating action. All trends are Stable.

Each of the loans is secured by a first lien on the mortgage property(ies). All loans were made by a major Canadian financial institution (the Lender) with maturity dates between February 2025 and December 2040. All outstanding loans are reported current and paid as agreed according to the Lender.

The credit rating upgrades for Langara Gardens reflect the positive pressure in the loan-to-value ratio (LTV) sizing benchmarks, primarily as a result of loan amortization. The collateral comprises two pari passu loans secured by an apartment complex with ground-floor retail in Vancouver. The loan benefits from (1) the expected stability of debt payments, given the strong operating history and institutional sponsorship; (2) a low LTV; (3) the property's location in a well-established residential neighbourhood with proximity to retail commercial nodes and public transit; and (4) the expected partial amortization on a 20-year schedule that will take place over the remaining loan term. In its analysis, Morningstar DBRS' analysis applied a stressed scenario, which considered a 20% haircut to the Morningstar DBRS net cash flow (NCF) derived at issuance, further supporting the credit rating upgrades. First dollar loss ratings do not consider the timeliness of principal and interest payments.

Four transactions (351 Hillmount Road, Winston Business Park, Superior Business Park, and Kingswood Industrial Park) are secured by four industrial properties, with three in the Greater Toronto Area, Ontario, and one in Richmond, British Columbia. While the loan documents on file for Winston Business Park and Superior Business Park are dated, with some tenant rollover at either property during the next 12 months, both submarkets exhibited strong fundamentals with vacancy rates below 5.0%. The credit rating confirmations reflect (1) the overall expected stability of debt payments given the strong operating history and institutional sponsorship; (2) generally long-term tenancy; (3) the locations of these properties in well-established industrial parks; and (4) the expected partial to full amortization that will take place over the remaining term of each loan.

Two transactions (Tillicum Centre and Aspen Landing Shopping Centre) are secured by grocery-anchored retail centres in Victoria, British Columbia, and Calgary, Alberta. The credit rating confirmations reflect (1) the expected stability of debt payments, given the stable operating history and institutional sponsorship; (2) long-term tenancy and stable historical occupancies; (3) the properties' central locations in major retail corridors with proximity to various demand drivers; and (4) the expected partial amortization that will take place over the remaining term of each loan.

One transaction (Infinity Building) comprises two pari passu loans secured by a mixed-use property in Vancouver. The credit rating confirmations reflect (1) the expected stability of debt payments, given the strong operating history and institutional sponsorship; (2) the property's location in a well-established retail corridor that is well-serviced by public transportation; (3) long-term tenancy coupled with a corporate guarantee by an investment-grade parent; and (4) the expected partial amortization that will take place over the remaining loan term.

One transaction (Paramount Apartments Limited) comprises two pari passu loans secured by a multifamily property in Halifax, Nova Scotia. The credit rating confirmations reflect (1) the expected stability of debt payments, given the stable operating history and institutional sponsorship; (2) the history of stable occupancy and above-market rents; (3) the location of the property in a strong multifamily submarket; (4) the expected partial amortization that will take place over the remining loan term.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024; https://dbrs.morningstar.com/research/427030)

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798)

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was not initiated at the request of the rated entity. The credit rating was initiated at the request of a third party.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.

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

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (July 11, 2024; https://dbrs.morningstar.com/research/436004)
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024; https://dbrs.morningstar.com/research/435293)
-- North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://dbrs.morningstar.com/research/419592)
-- Legal Criteria for Canadian Structured Finance (June 20, 2023; https://dbrs.morningstar.com/research/416101)

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