DBRS Upgrades Erin Mills Town Centre to A (low) from BBB (high) with a Stable Trend

DBRS has today upgraded the rating of Erin Mills Town Centre (the Mall) and Erin Mills Town Plaza’s (the Plaza; collectively, the Project) First Mortgage Bonds, 7.03%, due August 26, 2013 (the Bonds), to A (low) from BBB (high). The Project has continued to perform well with increased coverage ratios.

The rating upgrade reflects the following: 1) Net operating income (NOI) increased slightly for the year ended October 31, 2009, the interest coverage and debt service coverage remains strong. 2) Correspondingly, the Project’s interest coverage and debt service coverage ratios (DSCR) were reported at 3.62 times and 2.31 times, respectively, for the F2009. 3) The Mall’s commercial retail unit (CRU) sales performance has remained near $500 psf over the past several years ($483 for F2009) and this level partly reflects the competitive retail trade area it shares with other dominant and super-regional malls.

DBRS believes that, going forward, CRU sales will continue to benefit from the nearby residential development and the addition of new tenants.

The rating also takes into consideration: (1) Bondholders have a first-ranking charge on the Project. Erin Mills is a well-located and prominent regional shopping centre located in Mississauga, Ontario. (2) The Cadillac Fairview Corporation Ltd. (Cadillac Fairview) and The Erin Mills Development Corporation (collectively, the Co-Owners) each own 50% of the Project. Notwithstanding the Project’s strong sponsorship in Cadillac Fairview and its parent, the Ontario Teachers’ Pension Plan, the rating recognizes the fact that bondholders’ recourse is to the Project only. (3) The Project’s loan-to-value (LTV) ratio is very conservative, with $79.3 million of debt outstanding, as of August 31, 2010.

For more detailed information on the Project and the DBRS analysis, please refer to the full rating report available on the DBRS web site.

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

The applicable methodologies are Rating Real Estate and Canadian Structured Finance Flow-Through Ratings, which can be found on our website under Methodologies.