DBRS Confirms Choice Properties Limited Partnership at BBB, Changes Trends to Positive

DBRS Limited (DBRS) has today confirmed the Issuer Rating and Senior Unsecured Debenture rating of Choice Properties Limited Partnership (CPLP) as well as the Senior Unsecured Debenture (guaranteed by CPLP) rating of Choice Properties Real Estate Investment Trust (CP REIT; collectively, Choice Properties or the Trust) at BBB and has changed the trends to Positive from Stable. This trend change reflects DBRS’s recent change in Loblaw Companies Limited’s (Loblaw; rated BBB with a Positive trend by DBRS) trend to Positive from Stable. (See DBRS’s press release dated March 11, 2016).

The ratings continue to be based on DBRS’s view that the credit risk profiles of Choice Properties and Loblaw are aligned. (See the Loblaw rating report dated March 25, 2015, for rating considerations.) The alignment is primarily a result of the following: (1) Loblaw owns and controls approximately 83% of Choice Properties as at December 31, 2015 (YE2015), and George Weston Limited (GWL; rated BBB with a Stable trend by DBRS), Loblaw’s parent, owns approximately 6% of Choice Properties as at YE2015; (2) Loblaw is Choice Properties’ principal tenant, representing approximately 91.1% of annual base rent and 89.1% of its gross leasable area (GLA) as at YE2015; (3) Choice Properties’ portfolio of properties represents, on a GLA basis, approximately 81% of the combined portfolio of Loblaw- and Choice Properties-owned real estate (Loblaw retains direct ownership of approximately 9.5 million square feet of GLA); and (4) Choice Properties’ leases with Loblaw have a weighted-average remaining lease term of 12.3 years as at YE2015.

Choice Properties’ credit risk profile could begin to be assessed on a stand-alone basis if Loblaw’s ownership and/or control in the Trust diminish materially over time. The rating on Choice Properties could also move independently of Loblaw, without a meaningful reduction of ownership by Loblaw, should the Trust materially grow and diversify its tenant base over the longer term.

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 Companies in the Merchandising Industry (August 2015) and DBRS Criteria: Guarantees and Other Forms of Explicit Support (February 2016), which can be found on our website under Methodologies.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.