DBRS Confirms Rating of Brookfield Properties (BHT) Ltd. – Bankers Court Mortgage Loan at BBB (low)

DBRS has today confirmed the rating of BBB (low) on the 4.962% Mortgage Loan due November 1, 2020, by a major Canadian financial institution.

The Bankers Court (the Subject Property) is a Class A, 15-storey office complex, comprising 256,580 square foot (sf) of office space and 6,563 sf of retail space, located in downtown Calgary, Alberta. The Subject Property is currently co-owned by Brookfield Properties (BHT) Ltd. (the Borrower) (50% interest) and bcIMC Realty Corporation (50% interest). The Mortgage Loan is secured by the Borrower’s interest in the Subject Property.

The Mortgage Loan was advanced in October 2010, subject to a 4.962% interest rate per annum, calculated monthly and compounded semi-annually, not in advance, for a term maturity on November 1, 2020, and a 25-year amortization schedule. The Mortgage Loan had an outstanding balance of $44,933,248 as of October 1, 2013. Since then, the loan has amortized down 1.9% to an outstanding balance of $44,071,196 as of July 1, 2014. At maturity, the outstanding balance under the Mortgage Loan will have amortized more than 21% to $35,377,332.

Based on its own underwriting of the property cash flows, DBRS derived a stabilized net cash flow (NCF) with respect to the Borrower’s interest that was slightly lower than the Borrower’s YE2013 NCF, representing a derived term DSCR that exceeds 1.3 times (x). The derived DSCR is also expected to exceed 1.4x at the time of refinancing, as the projected amortization of the principal balance on the Mortgage Loan will most likely more than offset the projected increase in the cost of financing.

DBRS assumes that the Borrower will refinance in 2020 to pay off the principal remaining on the Mortgage Loan, and the rating considers the ability of the Borrower to refinance at the end of the Mortgage Loan term. The location and property condition and the expected amortization of the Mortgage Loan during the term, coupled with the stability of the income from the office space, which more than covers the service of the debt, collectively continue to support the BBB (low) 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.