DBRS Confirms Choice Properties Limited Partnership at BBB, Stable

DBRS has today confirmed the Issuer Rating and Senior Unsecured Debenture of Choice Properties Limited Partnership (CPLP) and the Senior Unsecured Debenture (guaranteed by CPLP) rating of Choice Properties Real Estate Investment Trust (collectively, Choice Properties or the Trust) at BBB, all with Stable trends. The ratings continue to be based on DBRS’s view that the credit risk profiles of Choice Properties and Loblaw Companies Limited (Loblaw; rated BBB with a Stable trend by DBRS) are aligned. See the Loblaw rating report dated October 31, 2013, for rating considerations. The alignment is primarily due to the following: (1) Loblaw owns and controls over 80% of Choice Properties. In addition, George Weston Limited (rated BBB with a Stable trend), the parent of Loblaw, owns approximately 5% of outstanding units. (2) Loblaw is Choice Properties’ most significant tenant for the foreseeable future, representing approximately 91.4% of base rent in H1 2014 and 88.2% of its gross leasable area (GLA) as at Q2 2014. (3) Choice Properties’ portfolio of properties represents approximately 80% of Loblaw’s total owned real estate on a GLA basis (Loblaw retained direct ownership of 10 million square feet of real estate). (4) Choice Properties’ leases with Loblaw have a weighted-average remaining lease term of 13.1 years.

Choice Properties’ credit risk profile could begin to be assessed on a stand-alone basis if Loblaw’s ownership and/or control in the Trust diminish materially over time. The rating of Choice Properties could also move independently of Loblaw, without a meaningful reduction of ownership by Loblaw, should the Trust materially grow and diversify its tenant base over the longer term. DBRS believes Choice Properties possesses attributes of an investment-grade profile on a stand-alone basis (i.e., size, asset quality, geographic diversification, financial leverage and interest coverage), but notes the Trust’s rating could not exceed Loblaw’s credit rating should Loblaw still be the predominant tenant. DBRS has provided a summary of its analysis (qualitative attributes, earnings profile, financial profile, etc.) of Choice Properties for those interested in the Trust on a stand-alone basis in the rating report available at www.dbrs.com.

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.