DBRS Confirms Rating on Brookfield Properties (BHT) Ltd. – Bankers Court Mortgage Loan at BBB (low)

DBRS Limited (DBRS) confirmed the BBB (low) rating of the 4.962% Mortgage Loan due November 1, 2020 (the Mortgage Loan), by a major Canadian financial institution (the Lender). Bankers Court (the Subject Property) is currently co-owned by Brookfield Properties (BHT) Ltd. (the Borrower; 50% interest) and bcIMC Realty Corporation (50% interest). The Mortgage Loan is secured by the Borrower’s interest in the Subject Property.

This rating reflects DBRS’s opinion on the first-dollar loss that the Lender may experience regarding the interest and principal payment obligations of the Borrower in relation to the Mortgage Loan, solely based on the cash flows (not necessarily considering the timing of those cash flows) generated by the Subject Property as well as on the current and/or future value of such property.

Bankers Court is a Class A, 15-storey office complex, comprising 256,580 square feet (sf) of office space and 6,563 sf of retail space located in downtown Calgary, Alberta.

The Mortgage Loan was advanced in October 2010, subject to a 4.962% interest rate per annum, calculated monthly and compounded semi-annually, not in advance, for a term maturing on November 1, 2020, and on a 25-year amortization schedule. The Mortgage Loan had an outstanding balance of $39.1 million as at May 1, 2018.
A derived term debt service coverage ratio (DSCR) exceeds 1.2 times (x). The derived DSCR is also expected to exceed 1.3x at the time of refinancing, as the projected amortization of the principal balance on the Mortgage Loan will most likely more than offset the projected increase in the cost of financing.
DBRS assumes that the Borrower will refinance in 2020 to pay off the principal remaining on the Mortgage Loan, and the rating considers the ability of the Borrower to refinance at the end of the Mortgage Loan term. The location, the property condition and the expected amortization of the Mortgage Loan during the term, coupled with the stability of the income from the office space, which more than covers the service of the debt, continue to collectively support the BBB (low) rating.

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

The principal methodology is North American Single-Asset/Single-Borrower Methodology (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 not 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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.