DBRS Changes Trend on Crombie REIT to Stable from Negative, Confirms Rating at BBB (low)

DBRS Limited (DBRS) changed the trend on the Senior Unsecured Debentures rating of Crombie Real Estate Investment Trust (Crombie or the Trust) to Stable from Negative and confirmed the rating at BBB (low).

This trend change is a reflection of the improvement to the credit risk profile of Sobeys Inc. (Sobeys), Crombie’s largest tenant. On March 15, 2018, DBRS confirmed Sobeys’ rating at BB (high) and changed its trend to Stable from Negative (see DBRS press release dated March 15, 2018). This action is consistent with the views expressed by DBRS in its March 15, 2017, press release outlining the conditions upon which DBRS may consider returning Crombie’s trend to Stable.

Should Sobeys Inc.’s trend move to Positive, it is likely that DBRS would maintain Crombie’s Stable trend. Should Sobeys Inc.’s rating be upgraded to BBB (low), it is likely that DBRS would maintain Crombie’s rating at BBB (low). Crombie’s credit risk profile will continue to include assessments of Sobeys’ business strategy and supply and demand dynamics in the Canadian retail space.

Crombie’s rating is supported by its mid-sized portfolio of grocery- and drugstore-anchored retail properties, the portfolio’s geographic diversification and the long-term nature of its leases. Crombie’s year-end EBITDA increased relative to the prior year, largely because of full-year earnings contributions from recent investments. The Trust’s DBRS-adjusted debt interest expense increased modestly year over year, resulting in a slight improvement in EBITDA interest coverage and debt-to-EBITDA ratio.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodologies used are Rating Entities in the Real Estate Industry (April 2017), DBRS Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (December 2017) and DBRS Criteria: Guarantees and Other Forms of Support (January 2018), which can be found on dbrs.com under Methodologies.

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 under Related Documents or by contacting us at info@dbrs.com.

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

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