DBRS Confirms Bow Centre Street Limited Partnership Ratings at “A,” Stable Trend

DBRS Limited (DBRS) has today confirmed the ratings on the Series A, Series B and Series C Secured Bonds (the Bonds) of Bow Centre Street Limited Partnership (the Issuer) secured by The Bow (the Complex) at “A,” with a Stable trend. The rating confirmations are based on The Bow’s operating performance over the past year and the expectation of continued stability in net operating income (NOI) over the course of the Bonds’ term, provided by Complex’s 25-year lease to an investment-grade tenant (Encana, rated BBB with a Stable trend by DBRS).

The ratings continue to be supported by the high quality and attractive location of The Bow, its 25-year lease to Encana, and solid debt service coverage. The ratings also consider the exposure to Encana as the Complex’s single tenant, as well as the modest step-ups in rental rates over the term of the lease. DBRS notes that a negative rating action on the Bonds could result from a material deterioration in Encana’s credit risk profile.

In terms of financial leverage, DBRS notes that total secured debt outstanding may not exceed $800 million during the term of Encana’s lease, and $365 million at the end of the lease in 2038. There is currently approximately $785.5 million of secured bonds outstanding. The Bow is fully occupied and generated approximately $93 million of annual NOI. Debt service coverage and interest coverage ratios were solid at 2.70 times (x) and 3.15x, respectively, for the LTM ended March 31, 2015, in line with DBRS’s expectations. Going forward, NOI and coverage ratios are expected to improve modestly based on nominal office and parking stall rental rate increases of 0.75% and 1.50% per year, respectively, over the term of Encana’s lease.

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 (May 2015), which can be found on our website under Methodologies.

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

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.