Fitch Affirms IMSCI 2012-2; Removes 2 Classes from Rating Watch Negative

CHICAGO--()--Fitch Ratings has affirmed nine classes of Institutional Mortgage Capital, commercial mortgage pass-through certificates series 2012-2 (IMSCI 2012-2). A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmations and removal of classes F and G from Rating Watch Negative reflect the overall stable performance of the pool (excluding the specially serviced asset) and an increase in credit enhancement to the senior tranches relative to Fitch modeled losses from defeasance of 5.5% of the pool balance. Additionally, the specially serviced asset did not sustain structural damage or loss from the recent Fort McMurray, Alberta wildfires.

The pool balance has been reduced 13.4% to C$208 million from C$240.2 million at issuance with 29 loans remaining. There are no full or partial interest only loans in the pool. Approximately 31.7% of the pool has a scheduled maturity date in 2017, including the specially serviced loan.

The specially serviced loan is the third-largest loan in the pool, Lakewood Apartments (8.3%), which transferred to special servicing in March 2016. The property transferred to special servicing due a significant decline in occupancy stemming from the turmoil in the energy sector. The servicer-reported occupancy as of February 2016 was 53%. Recently, the sponsor and special servicer agreed to a 12-month forbearance agreement. Operations at the property were subsequently affected by the Fort McMurray wildfires in early May 2016 with the city and surrounding area evacuated. The sponsor is working to remediate the property for the return of tenants. The loan has full recourse to the borrower, sponsor and manager. Potential loan losses may be mitigated by recourse provisions, insurance proceeds and a recovery in the energy markets.

The largest loan in the pool is Cedars Apartments (9.8%), which is secured by a low-rise multifamily residential development located in Calgary, Alberta. The sponsor is Lanesborough REIT (LREIT), which is the same sponsor as the specially serviced asset. The loan has full recourse to the borrower and sponsor. The 276-unit property reported occupancy of 91.3% as of year-end (YE) 2015 compared with 97.1% at issuance.

The second largest loan in the pool, Chateau Janeville Apartments (8.7% of the pool), is secured by a 271-unit apartment complex located in Ottawa, Ontario. The reported occupancy as of YE 2015 was approximately 97.4% similar to issuance. The loan is full recourse to the borrower.

RATING SENSITIVITIES

The Rating Outlook on classes E, F and G are Negative due to the uncertainty regarding the operations and performance of the specially serviced loan. The Rating Outlook on the senior classes remains Stable as the classes benefit from 5.5% defeasance; although the transaction could further de-lever when several performing loans mature in 2017, upgrades may be limited as the pool is becoming more concentrated.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch affirms and removes the following classes from Rating Watch Negative and assigns a Negative Outlook as indicated:

--C$3 million class F* at 'BBsf'; Outlook Negative;

--C$2.4 million class G* at 'Bsf'; Outlook Negative.

Fitch affirms the following classes:

--C$109 million class A-1 at 'AAAsf'; Outlook Stable;

--C$63 million class A-2 at 'AAAsf'; Outlook Stable;

--Interest-only class XP at 'AAAsf'; Outlook Stable;

--C$6 million class B at 'AAsf'; Outlook Stable;

--C$8.4 million class C at 'Asf'; Outlook Stable;

--C$7.2 million class D at 'BBBsf'; Outlook Stable;

--C$3.6 million class E at 'BBB-sf'; Outlook Negative.

* Non-offered certificates.

Fitch does not rate the C$5.4 million class H or the interest-only class XC.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882401

Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Related Research

IMSCI 2012-2 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684132

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1007826

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1007826

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Jeffrey Diliberto
Director
+1-312-368-3268
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson
Christopher Bushart
Senior Director
+1-212-908-0606
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Jeffrey Diliberto
Director
+1-312-368-3268
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson
Christopher Bushart
Senior Director
+1-212-908-0606
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com