DBRS Updates Galeries D’Anjou FMBs to A (low) with a Stable Trend

DBRS has today upgraded the rating of First Mortgage Bonds, due 2012 (the Bonds) issued by Galeries D’Anjou Shopping Centre (D’Anjou or the Shopping Centre) with a Stable trend. The Shopping Centre’s credit profile remains stable, with modestly improving operating fundamentals and a satisfactory interest coverage ratio.

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

(1) D’Anjou is a well-established regional shopping centre, located on a 96-acre site in the city of Anjou, an eastern suburb of Montréal. The Shopping Centre is ideally situated, with good road accessibility, at the southwest corner of Louis-Hippolyte-Lafontaine Boulevard (Autoroute 25) and the Trans-Canada Highway (Autoroute 40).

(2) Interest coverage at 2.67 times (x) for YE2010 is consistent with the historical performance of the loan and is in line with the current rating category.

(3) D’Anjou has strong ownership in The Cadillac Fairview Corporation Ltd. (CFCL) for 50% and Ivanhoe Cambridge I Inc. and Ivanhoe Cambridge II Inc. (collectively, Ivanhoe Cambridge) for 50%. Bondholders have recourse to the CFCL and Ivanhoe Cambridge on a several basis in proportion to their respective interests.

Challenges for the rating include the following:

(1) Notwithstanding consistent year-over-year improvement, sales performance continues to lag comparable shopping centres in eastern and central Canada rated by DBRS.

(2) The Bonds mature November 1, 2012, with a scheduled balloon payment of $102 million. As the Bonds are interest only, with no amortization of principal for the life of the issue, the refinance risk will be significantly higher than that of a fully amortizing loan.

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.