DBRS Assigns Stable Trend to and Confirms Rating on Mortgage Loan Made to Brookfield Properties (BHT) Ltd. - Bankers Court

DBRS Limited (DBRS) assigned a Stable trend to and confirmed the rating of BBB (low) on the 4.962% Mortgage Loan due November 1, 2020 (the Loan), made to Brookfield Properties (BHT) Ltd. The Loan is secured by the Borrower’s 50% interest in Bankers Court (the Property), has a current outstanding balance of approximately $37.7 million as at May 1, 2019, and will mature on November 1, 2020, with a balloon balance of approximately $35.4 million.

DBRS’s current rating reflects the credit quality of the loan supported by a DBRS Exit Debt Yield of 12.2% based on DBRS’s net cash flow, which was 14.5% lower than the 2018 reported net operating income on a pro rata basis. Based on DBRS’s cap rate of 8.75%, the Loan represents current and maturity DBRS loan-to-value ratios of 76.2% and 71.4%, respectively, on a pro rata basis. The DBRS value is a 37.7% discount to the Borrower’s 2018 reported fair market value or 32.8% to the 2010 appraised value.

The Property is a 15-storey LEED Gold certified office building that was built in 2008. The property is located adjacent to the landmark Bankers Hall complex in Calgary’s central business district and is connected to the above-ground pedestrian network. As at December 31, 2018, the property was 99.1% leased and had been maintained above a 99.0%-leased rate since 2013. However, the reported annual net operating income has been declining at an average annual rate of 2.1% since 2015. Nevertheless, the property continues to benefit from strong sponsorship and property management from Brookfield Canada Office Properties as well as from the improving office market in Calgary.

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

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

The principal methodology is the 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.

This rating was initiated at the request of the lender.

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.

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