DBRS Confirms Rating on Dundee Properties Limited Partnership - Adelaide Place

DBRS has today confirmed the rating of BBB (low) with a Stable trend on the 4.795% Mortgage Loan due February 1, 2015 (the Initial Loan), by a major Canadian financial institution in relation to Adelaide Place.

The Initial Loan was originated in 2009 and is amortized over 25 years. It had an outstanding balance of $107,947,479 as of June 1, 2014. In July 2012, the Lender advanced an additional $40,000,000 (the Additional Loan) to Dundee Properties Limited Partnership (the Borrower), with the same maturity and amortization profile. In the event of a borrower default under the mortgage, the Additional Loan will be subordinated and postponed to the Initial Loan.

Both the Initial Loan and Additional Loan are secured by a freehold interest in an approximately 655,000-square foot office complex and a leasehold interest in 1,652 square feet of undeveloped land. Known as Adelaide Place, the office complex is located at 181 University Avenue and 150 York Street in the Financial Core of Toronto.

During the past year, the income and expenses remained consistent with the expectations of the initial rating. The vacancy rate has increased compared with the time of the initial rating but has stayed within DBRS’s expectations. Based on the underwriting of the property cash flows, DBRS derived a stabilized net cash flow for the property, which translates to term and refinance debt service coverage ratios, each of which is greater than one. DBRS considers the loan per square foot (psf) to be reasonable and a stabilizing factor. DBRS also considers the relatively short term to maturity of the Initial Loan an additional stabilizing factor.

This confirmation of the rating takes into consideration the in-place rental income of Adelaide Place and the principal and interest payment obligations of the Borrower with respect to the Initial Loan and the Additional Loan but does not take into consideration other obligations of the Borrower nor any structural deficiencies that may exist in any organizational or transaction documents. The relatively short remaining term to maturity of the Initial Loan (less than a year), coupled with DBRS’s underwriting of in-place rental cash flows, the reasonable psf loan and the amortization that will occur as at maturity are collectively supportive of the BBB (low) rating.

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

The applicable methodologies are CMBS Rating Methodology and CMBS North American Surveillance, which can be found on our website under Methodologies.

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.