DBRS Confirms Ratings of Brookfield Investments Corporation

DBRS has today confirmed the rating of Pfd-2 (low) with a Stable trend for the Senior Preferred Shares of Brookfield Investments Corporation (Brookfield Investments or the Company).

The rating confirmation reflects the reinstatement of dividends and recovery in market values for Brookfield Investments’ forest product investments, which have correspondingly contributed to an improvement in the Company’s asset and dividend coverage. The rating continues to be based on Brookfield Investments’ relatively stable portfolio of real estate and asset management investments, strong asset and dividend coverage, and ownership by Brookfield Asset Management Inc. (BAM; rated A (low), Negative trend by DBRS). The rating remains limited by Brookfield Investments’ exposure to the volatility of overall capital markets, concentration of investments in the real estate sector, lack of investment restrictions, and the relative illiquidity of unlisted investments.

On April 12, 2013, Brookfield Investments announced the acquisition of a 10.6% economic interest in Brookfield Property Partners L.P. (BPY), a newly created diversified real estate company that was spun-off from BAM on April 15, 2013, for the Company’s 11% common share interest in Brookfield Office Properties Inc. (BOP: rated BBB, Stable trend by DBRS) and its portfolio of preferred shares of BOP.

In addition, Brookfield Investments’ 36% limited partnership interest in BPY Holdings L.P.(formerly known as Brookfield Europe LP) sold its interest in Canary Wharf Group plc, as well as certain other European assets, to BPY and received as consideration an indirect 8.9% economic interest in BPY’s business. DBRS notes that the Company continues to hold a 36% limited partnership interest in BPY Holdings L.P.

As a result of these two transactions, the Company holds a 14% indirect economic interest in BPY. Brookfield Investments’ interest in BPY (50.6% of total portfolio market value) further enhances the Company’s geographic and property diversification within the real estate sector and the stability of distributions going forward.

Overall asset coverage (based on market values) for the Senior Preferred Shares improved to 15.20 times as at September 30, 2013, from 14.72 times a year earlier. This improvement was primarily the result of a recovery in market values for Brookfield Investments’ forest product investments. Asset values also benefited from the aforementioned transactions. The Company’s proportion of real estate investments also decreased to 65% (on a market value basis as at September 30, 2013) from 69.6% a year earlier as a result of the recovery in forest product investment values.

Going forward, DBRS expects that the Company will focus new investments in stable, income-producing assets such as preferred shares or common shares of real estate, power and asset management entities. DBRS also expects that the Company’s strong asset coverage and dividend coverage ratios will remain supportive of the current rating category.

Notes:
All figures are in U.S. 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 Entities in the Real Estate Industry which can be found on our website under Methodologies.

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