DBRS Confirms CT Real Estate Investment Trust at BBB (high), Stable

DBRS has confirmed CT Real Estate Investment Trust’s (CT REIT or the Trust) Issuer Rating at BBB (high) with a Stable trend. The rating continues to be based on DBRS’s view that the credit risk profiles of CT REIT and Canadian Tire Corporation, Limited (Canadian Tire or CTC; rated BBB (high) by DBRS) are aligned. See Canadian Tire report dated November 6, 2013, for rating considerations. The alignment is primarily because of the following: (1) Canadian Tire currently owns approximately 83.2% of CT REIT’s equity and effectively controls the Trust as its major shareholder; (2) Canadian Tire is the Trust’s dominant tenant for the foreseeable future, representing approximately 94.7% of the Trust’s annual base minimum rent (97.1% if all Canadian Tire banner stores are included) as at Q2 2014; (3) CT REIT’s portfolio of properties represents approximately 73.7% of all of Canadian Tire’s owned real estate assets by square feet as at Q2 2014; (4) the appraised value of CT REIT’s total assets represents approximately 29.2% of Canadian Tire’s consolidated assets as shown on its balance sheet as at June 30, 2014; and (5) CT REIT’s leases for Canadian Tire retail stores have a long weighted-average lease term of approximately 15.2 years and CT REIT’s lease for Canadian Tire’s distribution centre has a long initial lease term of 16.3 years.

CT REIT’s credit risk profile could be assessed on a stand-alone basis if Canadian Tire’s ownership and/or control in the Trust diminish materially over time. The rating of the Trust could also move independently of Canadian Tire, without a meaningful reduction of ownership, should the Trust change materially in terms of size, portfolio composition and tenant profile over the longer term. DBRS believes that the Trust possesses attributes (i.e., size, asset quality, geographic diversification, financial leverage and interest coverage) on a stand-alone basis that would be considered characteristic of the lower end of investment grade, but notes that the Trust’s rating could not exceed CTC’s credit rating should CTC remain the predominant tenant.

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.

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

The applicable methodology is Rating Entities in the Real Estate Industry, which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.