DBRS Updates Provisional Rating Report on ScotiaPlaza, First Mortgage Bonds

DBRS has today updated its provisional rating report on SP Limited Partnership and SP1 Limited Partnership (ScotiaPlaza). The report update takes into consideration information received by DBRSsubsequent to the assigning of the initial provisional rating on May 22, 2012. Specifically, DBRS received amendments to the Bank of Nova Scotia (Scotiabank) leases, which stipulate a rental rate increase of 1% annually starting in year five for all Scotiabank leases, as opposed to the previously modelled rental rate increase of 10% occurring in year five of the said leases.

As a result, DBRS has adjusted the key credit metrics found in the “DBRS Cash Flow Analysis and Loan Sizing” section of the report. These adjustments include the following: a decline in the DBRS stabilized maturity net cash flow (NCF) to $61.75 million from $64.5 million, an increase in the DBRS maturity loan-to-value (LTV) ratio to 64.8% from 62.3%, a decline in the DBRS refinance debt service coverage ratio to 1.38 times from 1.43 times, and a change in the DBRS debt yield to 11.3% from 11.6%.

All other DBRS assumptions in the provisional rating report remain unchanged. While weaker, these revised credit metrics are viewed by DBRS in our updated stressed scenario to be supportive of the A (high) rating, which remains largely supported by the quality of the asset; the stability of the income, subject to long-term Scotiabank leases; and management expertise and reasonable sponsorship, with significant equity remaining in the transaction.

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

DBRS ratings for single-purpose real estate credits include consideration for the asset’s position within the market, the lease profiles, the valuation, the cash flow over the term of the issuance, the refinance position of the asset and the structure of the transaction including the organization of the Issuer. For more information on the property underwriting, DSCR and LTV guidelines that DBRS uses, please see the CMBS Rating Methodology. In addition, for this asset, DBRS used its Unified Interest Rate Model for U.S. and European Structured Credit methodology for future interest rate stresses.