DBRS Confirms CT REIT LP’s Issuer Rating and CT REIT’s Senior Unsecured Debentures Rating at BBB (high)

DBRS Limited (DBRS) has today confirmed the Issuer Rating of CT Real Estate Investment Trust Limited Partnership (CT REIT LP) and the Senior Unsecured Debentures of CT Real Estate Investment Trust (collectively, CT REIT or the Trust) at BBB (high), all with Stable trends. DBRS notes that on June 9, 2015, CT REIT issued $150 million 2.852% Series A Senior Unsecured Debentures due 2022 and $200 million 3.527% Series B Senior Unsecured Debentures due 2025. Please see press release dated June 9, 2015, for more information. The ratings continue 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. Please see Canadian Tire report dated November 21, 2014, for rating considerations.

The alignment is primarily because of the following: (1) Canadian Tire currently owns approximately 83.6% 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 96.4% of the Trust’s annualized base minimum rent (including all Canadian Tire banner stores) as at Q1 2015; (3) CT REIT’s portfolio of properties represents approximately 75.5% of all of Canadian Tire’s owned real estate assets by square feet (sf) as at Q1 2015; (4) the appraised value of CT REIT’s total assets represents approximately 28.3% of Canadian Tire’s consolidated assets as shown on its balance sheet as at Q1 2015; and (5) CT REIT’s leases for Canadian Tire retail stores have a long weighted-average (WA) lease term of approximately 14.3 years and CT REIT’s lease for Canadian Tire’s distribution centre has a long WA remaining lease term of 15.0 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 methodologies are Rating Entities in the Real Estate Industry (May 2015) and Rating Companies in the Merchandising Industry (January 2015), 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.