DBRS Changes Trends on West Edmonton Mall Property Inc.’s First Mortgage Bonds to Stable and Confirms Ratings

DBRS Limited (DBRS) changed the trends on the 4.309% First Mortgage 10-Year Interest Only Series B1 Bonds and on the 4.056% First Mortgage 10-Year Amortizing Series B2 Bonds (collectively, the Bonds) issued by West Edmonton Mall Property Inc. (the Issuer) to Stable from Positive and confirmed the ratings at A (sf). The Bonds are secured by the Issuer’s interest in the West Edmonton Mall.

The Bonds were issued on January 20, 2014, with a ten-year term and mature on February 13, 2024. As of February 13, 2019, the total outstanding balance of the Bonds was approximately $815.4 million; the Bonds will have amortized to $711.9 million at maturity.

The current ratings reflect the credit quality of the Bonds as supported by the results of DBRS analytics, which indicate a DBRS Exit Debt Yield of 15.6% based on DBRS’s stressed net cash flow, which was 19.7% lower than the reported YE2018 operating net operating income. Based on DBRS’s implied cape rate, the Bonds represent DBRS current and Refi loan-to-value of 61.2% and 53.4%, respectively. The Stable trends reflect stabilized rental revenue since last year as the two new tenants that leased most of the former Target space have taken occupancy and started paying rents.

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

DBRS provides 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 North American CMBS Surveillance Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. 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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

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