DBRS Confirms Lime Ridge Mall FMBs at A (low) with a Stable Trend

DBRS has today confirmed the rating of Lime Ridge Mall’s the 5.317% First Mortgage Bonds, due 6/1/2020 (the Bonds) at A (low) with a Stable trend. Lime Ridge Mall’s credit profile remains stable, with modestly improving operating fundamentals and a satisfactory interest coverage ratio.

The current rating is based on the performance of Lime Ridge Mall and reflects the following strengths:

(1) Lime Ridge Mall is the dominant shopping centre in the Hamilton region, benefits from limited direct competition and is well located in the southern part of the city of Hamilton.

(2) Lime Ridge Mall benefits from having The Cadillac Fairview Corporation Ltd. (Cadillac Fairview) as its property manager. DBRS considers Cadillac Fairview to be a strong and experienced property manager. Cadillac Fairview has a portfolio valued at close to $19 billion, with nearly 50 million square feet of leasable space.

(3) The property has consistently exhibited strong financial performance, with continued growth in net operating income (NOI). The NOI for YE2010 was $26.7 million, up from $26.4 million for YE2009. Sales have also remained strong, at $529 per square foot (psf) as of F2010, and have been relatively stable throughout recessionary periods.

Challenges for the rating include the following:

(1) Lime Ridge Mall was built in 1981 and the exterior of the property shows its age.

(2) The occupancy cost ratio for the mall, at 18.9%, is slightly higher than Cadillac Fairview’s portfolio. Cadillac Fairview has stated that the average occupancy cost ratio across its portfolio is 16% to 17%.

(3) The Bonds are interest only, meaning that the principal balance does not reduce over the term of the loan and will have a bullet payment of $181 million at maturity.

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.