DBRS Upgrades Market Mall FMBs to A (high) with a Stable Trend

DBRS has today upgraded the rating of the 6.64% FM Bonds, Series A, due February 02/2014 (the Bonds) secured by Market Mall (the Shopping Centre) to A (high) from “A” with a Stable trend. The Shopping Centre’s credit profile remains strong, with support from strong sales performance and improving credit metrics.

The current rating is based on the performance of the Shopping Centre and reflects the following strengths:

(1) Market Mall is a prominent, well-located regional shopping centre in northwest Calgary. The Shopping Centre has strong commercial retail unit (CRU) sales of $864 per square foot (psf), according to the February 2011 sales report, ranking near the top of the shopping centres rated by DBRS.

(2) Market Mall’s improved operating performance has resulted in a moderate increase in interest coverage and debt service coverage ratios (4.99 times (x) and 3.03x, respectively, for F2010).

(3) The Shopping Centre has strong ownership in The Cadillac Fairview Corporation Ltd. (CFCL) and Ivanhoe Cambridge I Inc. and Ivanhoe Cambridge II Inc. (collectively, Ivanhoe Cambridge, and, with CFCL, the Co-Owners). Bondholders have recourse to the Co-Owners on a several basis in proportion to their 50% interest in the property.

(4) The loan has low leverage, with a conservative loan-to-value ratio (LTV) with approximately $103 million in outstanding debt against the shopping centre as of June 2011.

Challenges for the rating include the following:

(1) Calgary remains one of the most competitive retail cities in Canada, with a number of well-performing regional shopping centres, including Chinook Centre and Southcentre Mall.

(2) There is heavy CRU tenant rollover (26.2% of the net rentable area (NRA)) in 2014, which is also the year the Bonds mature.

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

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