DBRS Maintains BPO’s Ratings Under Review with Developing Implications Status

DBRS Limited (DBRS) has today maintained its status of Under Review with Developing Implications on the ratings of Brookfield Office Properties Inc.’s (BPO or the Company) Senior Unsecured Notes and Cumulative Redeemable Preferred Shares, Class AAA (the Preferred Shares). The Under Review with Developing Implications status reflects the completion of the review of the downstream guarantees provided by Brookfield Property Partners LP (BPY) and its other related entities to BPO’s Senior Unsecured Notes and Preferred Shares (the downstream guarantees) and BPO’s recent internal restructuring. DBRS had originally placed the ratings on Under Review status on August 3, 2016, following the announcement of the downstream guarantees.

DBRS reviewed the downstream guarantee documents for BPO’s Senior Unsecured Notes and the Preferred Shares against the “DBRS Criteria: Guarantees and Other Forms of Support” (February 2016) and all of DBRS’s guarantee criteria were met. DBRS concluded the downstream guarantees provided by BPY; other related entities of BPY and BPY’s credit risk profile do not have any credit implications for the ratings of BPO’s Senior Unsecured Debentures and the Preferred Shares.

In July 2016, BPY completed an internal restructure to consolidate the ownership of its core retail and core office assets within the United States by transferring to a subsidiary of BPO its core retail investments, valued at approximately USD 9.1 billion. These core retail investments structurally sit in between BPO and its key U.S. operating assets.

The resolution of the Under Review status will be based on DBRS’s review of the above-referenced transaction and its impact on BPO. DBRS will focus on: (1) the Company’s business risk profile, assessing the potential benefits to asset quality, size and scale and asset type diversification; (2) the Company’s financial risk profile on a pro forma basis; (3) the potential for structural subordination of BPO’s Senior Unsecured Notes; and (4) legal review of executed documents.

DBRS aims to resolve the Under Review status within the next several weeks.

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 (June 2016), DBRS Criteria: Guarantees and Other Forms of Support (February 2016), Rating Holding Companies and Their Subsidiaries (January 2016) and Preferred Share and Hybrid Criteria for Corporate Issuers (January 2016), which can be found on our website under Methodologies.