DBRS Confirms bcIMC Realty’s Rating at AA with a Stable Trend

DBRS Limited (DBRS) has today confirmed the rating of bcIMC Realty Corporation’s (bcIMC Realty or the Company) Medium-Term Notes at AA with a Stable trend. The rating continues to be supported by the strength of bcIMC Realty’s owner and governance framework, as well as the Company’s institutional quality portfolio and conservative financial profile. In addition to these rating considerations, bcIMC Realty operates under a legislative framework and has a covenant pattern, both of which should help ensure the Company will continue to be financially managed in a prudent manner going forward. DBRS notes that bcIMC Realty (1) is prohibited from issuing additional indebtedness if, post-issuance, the ratio of indebtedness to market value of assets exceeds 35%; and (2) is prohibited from incurring indebtedness that would increase the total encumbered assets ratio (encumbered assets/aggregate assets) to 50% or greater (encumbered assets are deemed to be those that have a loan-to-value ratio of greater than or equal to 20%). DBRS also notes that the legislative framework makes it difficult for the ownership of bcIMC Realty to change, as the Company must always be 100% owned by registered pension plans.

DBRS expects bcIMC Realty will continue to deliver steady growth in operating income, mainly driven by its recent acquisitions (such as Bayview Village Shopping Centre in Toronto and three Delta hotels), and its completed development projects in 2014. These investments are expected to contribute incremental income of approximately $47.9 million in 2015 and approximately $78.4 million upon stabilization. As such, DBRS forecasts that EBITDA should reach above $600 million in 2015/2016. DBRS believes bcIMC Realty’s institutional quality commercial real estate assets and relatively long-term lease profile should continue to provide underlying stability to earnings going forward. In addition, bcIMC Realty’s office lease maturities are well balanced, which should help mitigate the impact of any softness that may arise in office market rents from new supply in the Company’s core Toronto and Calgary markets over the next several years. While DBRS does not anticipate significant acquisitions in 2015, mainly because of heightened valuations in the real estate market, the Company has the debt capacity and financial flexibility to take advantage of any attractive property investment opportunities that may arise over the medium term. bcIMC Realty’s leverage remains below the 25% to 30% range incorporated in the current rating. Financial flexibility continues to benefit from the Company’s large pool of unencumbered assets and ample cushion within its encumbered asset ratio covenant.

Notes:
All figures are in Canadian dollars unless otherwise noted.

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

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

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.