DBRS Confirms Choice Properties REIT’s Ratings Following Review of Loblaw’s Acquisition of Shoppers Drug Mart

DBRS has today confirmed the Issuer Rating and Senior Unsecured Debenture rating of Choice Properties Real Estate Investment Trust (CP REIT or the REIT) at BBB, with Stable trends. This action removes the ratings from Under Review with Developing Implications.

On July 15, 2013, CP REIT’s ratings were placed Under Review with Developing Implications following the announcement by Loblaw Companies Limited (Loblaw) of an offer to acquire the shares of Shoppers Drug Mart Corporation (Shoppers) for $12.4 billion and the assumption of approximately $1.2 billion of debt (the Transaction).

The confirmation of CP REIT’s ratings is directly related to DBRS’s confirmation of Loblaw following the conclusion of its review of the Transaction.

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 (rated BBB; see related press release), 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 portfolio of properties has a DBRS estimated market value of approximately $7.0 billion, representing a very significant proportion of Loblaw’s consolidated capitalization.

The Transaction does 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.

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.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.