DBRS Confirms Fifth Avenue LP & ARI 5AP Investments LP’s First Mortgage Bonds at A (low) (sf)

DBRS Limited (DBRS) confirmed the rating of the First Mortgage Bonds (the Bonds) issued by Fifth Avenue LP & ARI 5AP Investments LP at A (low) (sf) with a Stable trend. The Bonds are secured by Fifth Avenue Place (the Property) in Calgary, Alberta, and have a current outstanding balance of $278.3 million, which will mature on August 5, 2021. Recourse is limited to the Property only.

The current rating reflects the credit quality of the Bonds as supported by the results of DBRS’s analytics, which indicate a DBRS Exit Debt Yield of 14.5% based on DBRS’s stressed net cash flow, which was 18.2% lower than the reported YE2018 net operating income (NOI). Based on DBRS’s cap rate of 7.75%, the Bonds represent current and maturity loan-to-value ratios of 58.3% and 53.6%, respectively.

The overall property occupancy and NOI have improved significantly since 2016. As per the March 31, 2019, reporting rent roll, the Property was 81.8% leased as compared with 77.9% a year ago. Additionally, the YE2018 NOI is 20.7% higher than the prior year. Furthermore, the Property continues to benefit from strong sponsorship from Brookfield Canada Office Properties (BCOP) and Alberta Investment Management Corporation as well as capable property management provided by BCOP.

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 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.

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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