DBRS Confirms Ratings of The First Mortgage Bonds issued by Bow Centre Street Limited Partnership at A (sf) with Stable Trends

DBRS Limited (DBRS) confirmed the ratings of the Series A, Series B and Series C First Mortgage Bonds (collectively, the Bonds) issued by Bow Centre Street Limited Partnership and secured by The Bow (the Property) at A (sf) with Stable trends. The Series A and C Bonds were structured with interest-only payments, while the Series B Bonds were structured with principal and interest payment subject to an amortization schedule of 30 years. The Bonds have a current outstanding balance of $250.0 million, $219.3 million and $300.0 million, respectively, which will mature in June 2021, June 2022, and June 2023, respectively. Recourse is limited to the Property only.

The current rating reflects the credit quality of the Bonds as supported by the anticipated stable rental income from the long-term credit tenant of Encana Corporation (rated BBB (low), Stable by DBRS), which leased the entire Property until May 2038; however, 50% of the office space is subleased to Cenovus Energy Inc. (rated BBB, Negative DBRS). Based on DBRS net cash flow of $91.2 million, which was 10.0% lower than the reported YE2017 net operating income, and a DBRS cap rate of 7.75%, the Bonds represent a current total DBRS loan-to-value ratio of 65.4% and DBRS Exit Debt Yield of 12.1% as at June 2021, when the Series A Bonds are due.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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