DBRS Assigns A (low) Provisional Rating to RBC Centre, Toronto $300 Million First Mortgage Bonds

DBRS has today assigned a provisional rating of A (low) to the RBC Centre, Toronto (RBC Centre) $300 million First Mortgage Bonds (the Bonds). The Bonds will be direct obligations of Ontrea Inc. (the Issuer), with recourse limited to RBC Centre. The Bond issuance will have seven-year term, subject to a 30-year amortization period.

The Bonds are secured by the fee interest in the RBC Centre office building located at 155 Wellington Street West in the downtown financial core of Toronto. The total gross leaseable area is approximately 1.2 million square feet. The property was completed in 2009 and is a Leadership in Energy and Environmental Design (LEED) Gold property, one of only a few in the downtown core office market.

The rating takes into consideration credit characteristics of the issuance of the Bonds, inclusive of the quality of the asset; the stability of the cash flow, with long-term leases to investment-grade tenants extending beyond the loan maturity; sponsorship strength; and management experience. The DBRS stabilized net cash flow (NCF), when measured against a reversionary capitalization rate, and stressed refinance debt constant resulted in a 68.7% exit loan-to-value (LTV) and a 1.41 times refinance debt service coverage ratio (DSCR), respectively, supporting the A (low) rating. The loan represents an initial loan per square foot (psf) of $248. This is substantially less than the cost to construct, excluding land costs, which were reported to be approximately $342 psf. In addition, comparable property sales and thus values as evidenced by sales that have occurred in the last year range from a low of $309 psf to a high of $721 psf, according to the appraisal.

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

The applicable methodology is Rating Real Estate which can be found on our website under Methodologies.