DBRS Confirms Brookfield Investments Corporation Senior Preferred Shares at Pfd-2 (low)

DBRS Limited (DBRS) has today confirmed the rating of Pfd-2 (low) with a Stable trend for the Senior Preferred Shares of Brookfield Investments Corporation (Brookfield Investments or the Company). The rating continues to be based on the strength of Brookfield Investments’ owner (Brookfield Asset Management Inc. or BAM: rated A (low), Stable trend by DBRS), as well as the Company’s relatively stable portfolio of real estate and asset management investments, with strong asset and dividend coverage. The rating remains limited by Brookfield Investments’ exposure to the volatility of overall capital markets, concentration of investments in the real estate sector, lack of investment restrictions and the relative illiquidity of unlisted investments.

Overall asset coverage (based on market values) for the Senior Preferred Shares increased to 17.49 times (x), for the six-month period ending June 30, 2014 (H1 2014), from 14.60x a year earlier. This was mainly due to an increase in investment values, particularly the Company’s investment in Brookfield Property Partners (BPY). That said, Brookfield Investments’ portfolio continues to have a high degree of exposure to the real estate sector. The Company also reduced its investment in Western Forest Products Inc. (Western) by disposing of 26 million shares in January 2014. As at Q2 2014, the Company had a 12.0% ownership interest in Western. As a result of the aforementioned portfolio changes, the Company’s exposure to real estate investments was 67.3% (on a market value basis as at Q2 2014). Specifically, BPY represents 55.7% of the Company’s investment portfolio on a market value basis. This should continue to support overall market values and provide stable dividends going forward. DBRS believes that asset coverage of 17.49x for the Senior Preferred Shares (based on market values in H1 2014) and dividend coverage of 12.45x are strong for the current rating category and provide a good level of downside protection. In terms of future investments, DBRS expects the Company will focus on stable, income-producing assets, such as preferred or common shares in real estate and power sectors.

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.

The applicable methodology is Rating Entities in the Real Estate Industry (October 2013), which can be found on our website under Methodologies.

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