DBRS Assigns BBB (low) Rating to Allied Properties REIT’s $150 Million Series A Senior Unsecured Debentures

DBRS Limited (DBRS) has today assigned a rating of BBB (low) to the 3.748% $150 million Series A Senior Unsecured Debentures (the Series A Debentures) of Allied Properties Real Estate Investment Trust (Allied or the Trust). The trend is Stable. The Series A Debentures have been issued pursuant to a prospectus supplement dated May 8, 2015 to the Trust’s November 28, 2014, base shelf prospectus.

The intended use of the proceeds from the Series A Debentures will be: (1) to fund the acquisition of 511-539 King Street West, Toronto; (2) to repay amounts drawn on Allied’s unsecured credit facility used for general capital funding related to the Trust’s capital improvements, acquisitions and intensification projects; and (3) for general working capital purposes.

The financing is consistent with DBRS’s expectations incorporated in Allied’s November 10, 2014, assigned Issuer Rating. The Series A Debentures have a maturity date of May 13, 2020.

The Series A Debentures will be direct senior unsecured obligations of Allied, and will rank equally and rateably with all other debt securities, and with all other unsecured and unsubordinated indebtedness of the Trust.

During Q1 2015, EBITDA increased modestly by 2.5% to $48.2 million from $47 million in Q1 2014 primarily due to the lease up of additional space, rent increases on lease renewals and income contributions from property acquisitions valued at $233.9 million in 2014 and $23.5 million in Q1 2015. This increase more than offset a decrease in same-property net operating income (NOI) during the period. In Q1 2015, same portfolio NOI decreased by approximately $2 million or -4.2% due to higher vacancy in Eastern and Western Canada portfolio regions. During the quarter, Allied used equity to fund property investments and repay debt. This caused debt-to-capital to decline to 35.9% as at Q1 2015, from 37.4% a year earlier. EBITDA interest coverage (including capitalized interest) also remained strong for the current rating category and was 2.96 times during the period.

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

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.

The applicable methodology is Rating Entities in the Real Estate Industry (October 2013), 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.