DBRS Confirms The MaRS Development Trust at A (high), Stable Trend

DBRS Limited (DBRS) has today confirmed the rating of the Senior Secured Bonds (the Bonds) issued by The MaRS Development Trust (MaRS Trust) at A (high), with a Stable trend, following the rating confirmation of the University Health Network (UHN; rated AA (low), Stable trend, by DBRS; see the August 31, 2016, DBRS rating report for UHN). The MaRS Trust rating reflects the following factors: (1) the credit strength of UHN, which is responsible for servicing the MaRS Trust bonds through a credit tenant lease; (2) the structural subordination of the lease supporting the MaRS Trust bonds relative to the UHN bonds, as UHN bondholders benefit from a security interest in the bulk of incoming UHN cash receipts; and (3) a comprehensive security package that includes a charge on project assets, the UHN lease, various reserve accounts and insurance policies.

The $100 million proceeds from the first and only bond issue of MaRS Trust were used to finance the acquisition of land and the construction of the 400,000-square-foot Toronto Medical Discovery Tower (the Project). Construction began in February 2003 and was completed in August 2005, with costs coming in slightly below budget. The Project has been leased to UHN for a period of 30 years, which corresponds to the term of the MaRS Trust bonds. During this time, UHN will provide rent payments sufficient to service the bonds as well as cover all operating and maintenance costs.

The Project, along with other existing buildings on adjoining lands, is part of an overall effort by MaRS Discovery District to establish a place where the academic, research and business sectors from Canada’s science and technology industry can come together to help stimulate innovation, entrepreneurship and the creation of successful global businesses.

RATING DRIVERS
Given that the credit profile of MaRS Trust is linked to that of UHN, any revisions to the rating of the latter would trigger an equal move in the rating of MaRS Trust, although DBRS does not anticipate any movement in the rating given the Stable trend on UHN and the structure of the credit tenant lease. A rating action could occur if there was a change in the rating of the Province of Ontario (rated AA (low), Stable trend, by DBRS), which would affect the rating of UHN.

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 the North American CMBS Rating Methodology (Appendix E: Extensions of the Methodology – Credit Tenant Leases), which can be found on our website under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.