DBRS Confirms 131 Queen Street Limited Mortgage Loan at AAA with a Stable Trend

DBRS has today confirmed the AAA rating on the 5.31% Mortgage Loan Due November 1, 2026 in relation to the building at 131 Queen Street with a Stable trend. 131 Queen Street is a 13-storey Class A mixed-use property constructed in Ottawa in 2006, comprising approximately 312,000 sf of office space, 12,000 sf of retail space, and 36 furnished apartments (28,000 sf), for a total net rentable area of approximately 357,000 sf. Approximately 98% of the office space at the property is occupied by the Government of Canada (the Federal Government) , on a lease through 2026.

The rating confirmation considers that more than 85% of the building’s NRA is leased by the Federal Government, with a lease term nearly coterminous with that of the 20-year Mortgage Loan. This ensures a certain amount of property income to cover ongoing loan obligations which is required in the DBRS Structured Finance Flow-Through Ratings Methodology. In addition, the Borrower has multiple other sources of income from the premises (retail, apartments, and parking) to cover non-recoverable expenses, ground lease payments and any unforeseen costs at the property.

The Mortgage Loan amortizes over 25 years with a projected principal balance of$28,410,999 due at maturity on November 1, 2026. Thus, the rating confirmation considers the ability of the Borrower to refinance the outstanding balance in 2026. The Federal Government has an option to renew its lease for five years or to purchase the property at the end of its term in 2026. If it chooses to vacate, the Borrower will be forced to find other tenants for the majority of the building’s space.

In its analysis, DBRS assumed a number of worst-case scenarios at the time of refinancing to ensure that the probability of the Mortgage Loan being repaid was commensurate with a AAA rating. Under the DBRS stress scenarios, the Mortgage Loan was still repaid in full, which supports the assignment of a AAA rating to the Mortgage Loan.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

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

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

This rating did not include issuer participation and is based solely on publicly available information.