DBRS Publishes Updated Real Estate Methodology with Rating Impact

DBRS has today updated its corporate finance methodology “Rating Entities in the Real Estate Industry,” using the new revised format that provides a more concise, but still detailed, insight into the approach that DBRS uses to rate corporate securities in each industry.

In addition to this change in format, DBRS has removed the hospitality subsector from this methodology and has added an appendix entitled “Property Financing (First Mortgage Bonds),” which collects together in one place DBRS’s approach to rating first mortgage bonds; in other words, debt secured by a single site or several related sites, often owned by a special-purpose vehicle (SPV), as opposed to a corporate real estate entity that has other material sources of cash flow and raises other secured or unsecured debt, whose rating approach is addressed in the main section of the methodology. DBRS’s appendix to Rating Entities in the Real Estate Industry brings together criteria from the CMBS Rating Methodology and criteria relating to SPVs and other related topics.

As outlined in the appendix described above, where a property is held in a separate subsidiary that is not properly isolated or ring-fenced from the bankruptcy risk of its owner in an SPV that satisfies DBRS’s SPV criteria, the methodology now constrains the rating of a subsidiary real estate financing to that of the senior secured debt rating of the parent. Secondly, in cases where a satisfactory SPV exists, DBRS will now focus on the fundamentals of the property. These factors represent material changes to this methodology and DBRS has thus concurrently taken the following rating actions:

(1) Place Laurier – Under Review with Developing Implications
(2) Rideau Centre – Under Review with Developing Implications
(3) Market Mall (Cadillac & Cambridge) – Under Review with Developing Implications
(4) Lime Ridge Mall – Under Review with Developing Implications
(5) RBC Centre, Toronto – Under Review with Positive Implications

DBRS has also confirmed the following ratings:

(1) SP Limited Partnership and SP1 Limited Partnership (Scotia Plaza)
(2) Bow Centre Street Limited Partnership (the Bow)
(3) SEC LP and Arci Ltd. (Suncor Energy Centre)
(4) Fifth Avenue LP & 1023803 Alberta Ltd.

There were no other rating changes or rating actions caused by the update of this methodology.

DBRS will continue to update its other corporate finance methodologies in a similar manner in the future.

Please refer to the June 18, 2013, press release “DBRS Releases Five Corporate Methodology Updates” for details on the new format.

DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com.

Notes:
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.

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