DBRS Confirms Rating of Mortgage Loan Made to Morguard Realty Holdings Inc. & Bay Bloor Equities Inc. (77 Bloor Street West)

DBRS Limited (DBRS) confirmed the rating of A (high) with a Stable trend on the 4.964% Mortgage Loan due September 1, 2020 (the Loan) made to Morguard Realty Holdings Inc. & Bay Bloor Equities Inc. The Loan is secured by a freehold interest in a 21-storey Class B office building with street-level retail located at 77 Bloor Street West (the Property). As at July 1, 2019, the Loan has a current outstanding balance of approximately $19.4 million. The Loan will mature on September 1, 2020, with a balloon balance of approximately $18.4 million.

DBRS’s current rating reflects the credit quality of the Loan, supported by a DBRS Exit Debt Yield that is higher than 20.0% based on DBRS’s net cash flow, which was 16.0% lower than the 2018 reported net operating income (NOI), excluding lease-cancellation fees. Based on DBRS’s cap rate of 8.25%, the Loan represents current and maturity DBRS Loan-to-Value ratios of 18.9% and 18.0%, respectively.

Built in 1969 and renovated in 1996, the Property is a 21-storey LEED Gold–certified office building with street-level retail located at the southwest corner of Bay Street and Bloor Street West in the Bloor/Yonge submarket within Toronto’s Midtown office market. The property area is one of the premier shopping districts in Canada. As at February 28, 2019, the Property was 98.7% leased and had been maintained above a 97.0%-leased rate since 2013 with the exception of 2017. The reported annual NOI has been increasing since 2015. Additionally, the Property continues to benefit from experienced property management from Morguard Corporation as well as a stable office market in Toronto.

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.

DBRS Limited
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