DBRS Confirms Rating of Morguard Realty Holdings Inc. & Bay Bloor Equities Inc. (77 Bloor Street West)

DBRS has today confirmed the rating of A (high), with a Stable trend, on the 4.964% Mortgage Loan due September 1, 2020, by a major Canadian financial institution in relation to 77 Bloor Street West (the Lender).

The Mortgage Loan is secured by a freehold interest in approximately 376,534 square feet of office and high-grade retail and storage space. The property is located at 77 Bloor Street West, at the southwest corner of Bloor and Bay streets.

The Mortgage Loan was originated by the Lender, subject to a 4.964% interest rate per annum, calculated monthly and compounded semi-annually, not in advance, for a term maturing on September 1, 2020, and a 25-year amortization schedule. The Mortgage Loan had an outstanding balance of $22,903,337 as of June 1, 2014. DBRS assumes that Morguard Realty Holdings Inc. and Bay Bloor Equities Inc. (collectively, the Borrowers) will need to refinance at the end of the Mortgage Loan in 2020 to pay off the principal remaining on the Mortgage Loan and the rating considers the ability of the Borrowers to refinance.

In accordance with the applicable methodology and based on the December 2013 rent roll, DBRS re-underwrote the cash flows generated by the basic rental, parking and storage revenues as well as the expenses of the subject property. Based on its own underwriting, DBRS derived a stabilized NCF which translates to robust term and refinance DSCRs, in each instance, in excess of 3.3 times for the property. The refinance DSCR is reflective of an 8.5% constant that DBRS applied to the balloon balance of the Mortgage Loan to account for an increased cost of capital upon maturity. The Mortgage Loan represents a loan per square foot of $62 that amortizes throughout the term to $50. Overall, DBRS views the credit metrics of the Mortgage Loan to be supportive of the A (high) rating.

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.