DBRS Finalizes Rating of A (high) on OMERS Realty Corp. (Centennial Place)

DBRS has today finalized its provisional ratings of A (high) with Stable trends on the $210 million Centennial Place 3.666% Senior Series A Secured Bonds due 2022 and the $210 million Centennial Place 3.04% Senior Series B Secured Bonds due 2017 (collectively, the Bonds) of OMERS Realty Corporation (the Issuer or ORC) secured by Centennial Place (the Complex). As the Bonds are direct obligations of ORC, the ratings reflect the probability of an event of default at the Issuer level, despite the fact that recourse for the Bonds is limited to the Complex and there is no recourse to ORC.

DBRS notes that if the Bonds and the Complex were held by an entity that was bankruptcy remote from ORC, the cash flow and loan sizing parameters and the quality of the asset would be supportive of the A (low) rating category. The A (high) ratings reflect the credit quality of ORC and consider the following strengths: (1) ORC is 100% owned by OMERS Administration Corporation (OMERS), one of Canada’s largest pension funds (rated AAA by DBRS). (2) ORC owns direct or indirect interests in a large portfolio of high-quality office and retail properties, such as Royal Bank Plaza in Toronto, 1250 Rene Levesque in Montreal, Square One in Mississauga and Yorkdale Shopping Centre in Toronto. (3) ORC has a strong financial profile, with leverage and coverage ratios that are commensurate with the AA rating category. In addition, the financial position of ORC is strengthened by the fact that a majority of its total debt is either guaranteed by OMERS or provided by a related entity. (4) In terms of security, the Complex provides bondholders with excellent collateral.

The ratings also take into consideration the following challenges: (1) ORC’s portfolio has a relatively high degree of exposure to the office segment. (2) ORC’s portfolio is geographically concentrated in the Toronto and Calgary markets. (3) ORC has no specific financial covenants to limit leverage or maintain minimum coverage ratios, as is common with other DBRS-rated real estate entities. (4) In terms of the Bonds, a change of ownership could have rating implications. (5) Recourse for the Bonds is limited to the Complex and there is no recourse to the assets or undertakings of ORC.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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