DBRS Removes Under Review Status and Confirms Scotia Plaza Rating

DBRS Limited (DBRS) has today confirmed the rating of the $650 million 3.21% First Mortgage Bonds (the Bonds) of SP Limited Partnership and SP1 Limited Partnership (together, SP LP), KS SP Limited Partnership and KS SP1 Limited Partnership, and ARI SP Limited Partnership and ARI SP1 Limited Partnership (each an Issuer and, collectively, the Issuers) secured by Scotia Plaza (the Complex) at A (high) with a Stable trend. This rating action removes the rating from Under Review with Developing Implications.

On June 21, 2016, DBRS placed the rating on the Bonds Under Review with Developing Implications following the transfer of a combined 50% ownership interest in the Complex (the Transaction) from SP LP (owned by Dream Office Real Estate Investment Trust (Dream Office) and H&R Real Estate Investment Trust (H&R)) to newly formed entities, including KS SP Limited Partnership and KS SP1 Limited Partnership (together, KS LP; owned by KingSett Canadian Real Estate Income Fund LP (KingSett)) and ARI SP Limited Partnership and ARI SP1 Limited Partnership (together, ARI LP; managed by Alberta Investment Management Corporation (AIMCo)) (see DBRS press release from June 21, 2016). Following completion of the Transaction on June 30, 2016, Dream Office has a 50% ownership interest, KingSett has a 25% interest, AIMCo has a 25% interest and H&R no longer has an interest in the Complex.

DBRS’s review focused on all executed documents in connection with the Transaction and assessed whether the Transaction would meet the conditions to transfer an interest in the Complex to KS LP and ARI LP as per the Trust Indenture dated June 15, 2012.

The rating confirmation reflects DBRS’s receipt and review of all executed documents associated with the Transaction, including substantive non-consolidation opinions, the co-ownership agreement and supplemental indenture, which have satisfied DBRS’s first mortgage bond legal criteria on bankruptcy remoteness and elements of separateness of each of KS LP and ARI LP. In addition, the Transaction has met the conditions to transfer an interest in the Complex by a Sponsor Controlled Person (Dream Office as Sponsor controlling SP LP) to any transferee (ARI LP and KS LP) under the terms of the Trust Indenture dated June 15, 2012.

DBRS has also confirmed that KS LP and ARI LP have assumed all the rights and obligations of the Bonds related to the Trust Indenture, the security, the mortgage and such other transaction documents related to jointly owning the Complex.

KS LP and ARI LP, along with each of their respective general partners, are organized as special-purpose entities for the limited purpose of jointly owning, operating and maintaining the Complex (with all the Issuers). ARI LP is managed by Alberta Investment Management Corporation on behalf of certain Government of Alberta funds and endowments, and certain Alberta public sector pension plans. KS LP is owned and managed by KingSett, a private real estate investment vehicle with approximately $3.2 billion in real estate investments.

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