DBRS Morningstar Places Four Classes of Institutional Mortgage Securities Canada Inc., Series 2012-2 Under Review with Negative Implications

DBRS Limited (DBRS Morningstar) placed four classes of the Commercial Mortgage Pass-Through Certificates issued by Institutional Mortgage Securities Canada Inc., Series 2012-2 Under Review with Negative Implications as follows:

-- 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

There are no trends for these rating actions. After the last surveillance review in March 2019, DBRS Morningstar maintained Negative trends for Classes F and G, with Classes E and D assigned Stable trends. The Negative trends previously assigned to Classes F and G reflected DBRS Morningstar’s concerns surrounding the performance decline of the Lakewood Apartments loan (10.0% of the pool), secured by a property located in Fort McMurray.

DBRS Morningstar has taken these actions because of the concerns and uncertainty surrounding the Centre 1000 loan (Prospectus ID#7, 8.3% of the pool) amid recent developments with the loan sponsor, Strategic Group, LLC (Strategic Group).

On December 11, 2019, Strategic Group, a Calgary-based real estate investment firm, submitted an initial application filing under Canada’s Companies’ Creditors Arrangement Act (CCAA). The filing affects entities affiliated with 50 commercial properties within the company’s 171-property portfolio, including the collateral property for the Centre 1000 loan in this pool. The subject property has been underperforming following the loss of a major tenant in early 2018, driving the debt service coverage ratio (DSCR) down to 0.16 times (x) at year-end 2018, when occupancy for the property was reported at 62.0%. Updated occupancy and leasing information has been requested from the servicer and the response is pending. For further information on this loan, please see the DBRS Viewpoint platform, for which information has been provided below.

For further information on the filing and exposure across the DBRS Morningstar rated book, please see the December 18, 2019, commentary titled “The Impact of Strategic Group’s Creditor Protection Filing on CMBS Loans” on the DBRS Morningstar website at www.dbrs.com.

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 analysis and in-depth commentary in the DBRS Viewpoint platform.

For complimentary access to this content, please register for an account at www.viewpoint.dbrs.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, which can be found on www.dbrs.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 www.dbrs.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.

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 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.

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

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