DBRS Morningstar Confirms Rating on Series A Bonds of OMERS Realty Corporation, 9856889 Canada Inc. and CPP Investment Board Real Estate Holdings Inc. (Centennial Place)

DBRS Limited (DBRS Morningstar) confirmed the rating on the following first mortgage bonds (the Bonds) issued by OMERS Realty Corporation, 9856889 Canada Inc. and CPP Investment Board Real Estate Holdings Inc. (Centennial Place) (collectively, the Issuer):

-- Centennial Place 3.666% Senior Series A Secured Bonds due 2022 at AA (low) (sf)

The trend is Stable.

The rating confirmation reflects the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The Bonds are secured by the Issuer’s ownership interest in Centennial Place (the Property), a Class AA office complex in Calgary’s downtown Central Core office submarket. Recourse is limited to the property only. The Bonds have a current outstanding balance of $171.5 million (representing $138.0 per square foot (psf)) and will mature on December 5, 2022.

According to the March 31, 2021, rent roll, the office component of the Property was approximately 96.3% leased, which outperformed the market average occupancy level of 83.5% for Class AA office properties in the Calgary Central Core submarket as reported by CBRE Limited in its “MarketView Calgary Downtown Office, Q1 2021” report. In addition, the average in-place office rent of $32.41 psf as at March 31, 2021, was significantly higher than the submarket average of $22.69 psf for the Class AA office properties. The retail component of the Property, which represents approximately 1.7% of the total net rentable area, was 98.5% leased as at March 31, 2021. The Property’s net operating income (NOI) for year-end2020 declined 2.4% from the prior year primarily because of a decrease in base rents driven in part by a drop in rent collections during the Coronavirus Disease (COVID-19) pandemic. However, according to the Issuer, the average rental collection in the past six months has been approximately 98.0%. Finally, despite the decrease in NOI and challenging office market conditions in Calgary, the Property benefits from strong sponsorship by OMERS Realty Corporation and CPP Investment Board Real Estate Holdings Inc. as well as experienced property management by Oxford Properties Group Inc., which is the real estate investment arm of Ontario Municipal Employees Retirement System, one of Canada’s largest pension plans.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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.dbrsmorningstar.com or contact us at [email protected].

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