DBRS Upgrades ING Summit Industrial Fund LP to BBB With a Stable Trend

DBRS has today upgraded the Senior Unsecured Debentures of ING Summit Industrial Fund LP (ING Summit or the Industrial Fund) to BBB from BBB (low), with a Stable trend. This removes the rating from Under Review with Positive Implications, where it was placed on June 28, 2007.

The rating upgrade reflects the following considerations:

(1) Over the past several years, ING Summit (formally Summit Real Estate Investment Trust) has made significant progress in building a high quality portfolio of light industrial properties in eight key industrial markets across Canada. DBRS believes that ING Summit’s portfolio size and strengthening market position will allow the Industrial Fund to better withstand regional and local economic slowdowns, improve its leasing capabilities and tenant relationships, leading to greater retention rates. Going forward, these benefits of scale and the expectation that ING Summit will continue to build critical mass and size, should further enhance cash flow generation and stability.

(2) As part of ING Summit’s growth strategy, the Industrial Fund will place greater focus on its growing development and expansion platform, including significant land bank positions of approximately 13.1 million square feet on approximately 912 acres in major markets across Canada, such as the Greater Toronto Area, Calgary, Edmonton and Montreal. The Industrial Fund intends to develop industrial space in the range of 1.5 million square feet to 2 million square feet. annually on a go forward basis, which provides an alternative source of growth and offers greater returns than can be achieved in the current acquisition market. In the near term, ING Summit should also continue to benefit from internal growth opportunities, with support from favorable leasing conditions across its core markets, particularly in Alberta where the Industrial Fund has about 8.9 million square feet of space with base rents well below current market rates.

(3) ING Summit is expected to maintain solid credit metrics with improving financial flexibility. DBRS has incorporated in the rating action the expectation that ING Summit will prudently undertake acquisitions and development activity with leverage levels in an approximate range of 40% to 45%, while maintaining a DBRS estimated EBITDA interest coverage ratio of approximately 2.9 times (excludes capitalized interest) and approximately 2.6 times (includes capitalized interest). These metrics are solid for the BBB rating category and compare well to the Industrial Fund’s peer group. DBRS notes that the $530 million bridge facility used to partially finance the acquisition of Summit REIT has now been repaid in full. As a result, ING Summit’s credit metrics will remain within the above noted parameters.

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