Morningstar DBRS Confirms Credit Ratings on Mortgage Loans Made to Paramount Apartments Limited

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the following mortgage loans made to Paramount Apartments Limited by a major Canadian financial institution as follows:

-- 3.510% Mortgage Loan due February 1, 2025, at BBB (low)
-- 3.530% Mortgage Loan due February 1, 2025, at BBB (low)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction, which remains in line with Morningstar DBRS' expectations. The mortgage loans are secured by Paramount Apartments, a 174-unit apartment complex with ground-level commercial space in downtown Halifax, Nova Scotia, adjacent to the Halifax Public Gardens. The most recent rent roll available was dated March 2023, which reported an occupancy rate of 97.2%, which is generally in line with historical performance. According to the Canada Mortgage and Housing Corporation's January 2024 market data, the city of Halifax reported a vacancy rate of 1.0%, unchanged since October 2021 with an average two-bedroom rental rate of $1,628. According to the Universal Realty Group website, two-bedroom units at the subject are currently being marketed between $3,235 and $3,706 per month.

The provided Q2 2023 annualized reporting reflected a 4.2% increase in net operating income (NOI) from the YE2021 figure and was 11.7% above the Morningstar DBRS NOI. Both loans have a maturity date of February 1, 2025, and, given the continued stable performance of the property since issuance as well as the strong submarket, Morningstar DBRS expects the borrower should be able to secure takeout financing ahead of the upcoming maturity.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS   
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024; https://dbrs.morningstar.com/research/427030)

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

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

The principal methodology is the North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798)

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was not initiated at the request of the rated entity. The credit rating was initiated at the request of a third party.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428799)
-- DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://dbrs.morningstar.com/research/420982)
-- North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://dbrs.morningstar.com/research/419592)
-- Legal Criteria for Canadian Structured Finance (June 20, 2023; https://dbrs.morningstar.com/research/416101)

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at [email protected].