DBRS Places Choice Properties Real Estate Investment Trust Under Review with Developing Implications

DBRS has today placed the Issuer Rating and Senior Unsecured Debentures rating of Choice Properties Real Estate Investment Trust (CP REIT or the REIT) Under Review with Developing Implications.

This action is directly related to DBRS’s review of the ratings of Loblaw Companies Limited (Loblaw; see related press release), which followed Loblaw’s announcement of an offer to acquire the shares of Shoppers Drug Mart Corporation (Shoppers) for $12.4 billion and the assumption of approximately $1 billion of debt (the Transaction). The closing of the Transaction is subject to the approval of the shareholders of Shoppers and Loblaw, which is expected in September 2013.

CP REIT’s ratings are equivalent to those of Loblaw, largely based on the fact that:

-- Loblaw owns and controls over 80% of CP REIT. In addition, George Weston Limited (GWL; rated BBB), the parent of Loblaw, holds $200 million of CP REIT units (approximately 5.6% of outstanding units).
-- Loblaw is the REIT’s most significant tenant for the foreseeable future, representing approximately 91% of its annual base minimum rent and 88% of its gross leasable area.
-- The REIT’s portfolio of properties represents approximately 75% of Loblaw’s owned real estate (excluding the nominal amount of real estate acquired from the Transaction).
-- The REIT’s leases with Loblaw have a weighted-average remaining lease term of 14 years.

The Transaction would not materially affect the above factors that effectively align the credit risk profiles of Loblaw and the REIT. As such, CP REIT’s ratings will remain equivalent to the ratings of Loblaw, and the Under Review status will be resolved concurrent with Loblaw’s ratings resolution.

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 methodologies are Rating Real Estate Entities (April 2011) and Rating Companies in the Merchandising Industry (May 2011), which can be found on our website under Methodologies.