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) at AA (low) (sf), Stable Trend

DBRS Limited (DBRS Morningstar) confirmed its AA (low) (sf) rating with a Stable trend on the Centennial Place 3.666% Senior Series A Secured Bonds due 2022 (the Series A Bonds) issued by OMERS Realty Corporation (ORC; rated AA (low) with a Stable trend by DBRS Morningstar), 9856889 Canada Inc. and CPP Investment Board Real Estate Holdings Inc. (CPPIB REH; collectively with ORC and 9856889 Canada Inc., the Issuer). The Series A Bonds are secured by the Issuer’s ownership interest in Centennial Place, which is a Class AA office complex located in Calgary’s downtown Central Core office submarket. Recourse is limited to the property only.

The current rating reflects the credit quality of the Series A Bonds, supported by a DBRS Morningstar Exit Debt Yield of 19.9% based on DBRS Morningstar’s stressed net cash flow, which was 33.1% lower than the reported 2018 net operating income. Based on DBRS Morningstar’s cap rate of 7.75%, the Series A Bonds represent current and maturity loan-to-value ratios of 43.9% and 38.9%, respectively.

The property was 95.6% leased as per the September 30, 2019, rent roll while the actual occupancy level appeared to be around 90.0%. Approximately 27.0% of total net rentable area was occupied by subtenants; however, Centennial Place benefited from strong sponsorship by ORC and CPPIB REH 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.

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 dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology, which can be found on 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 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.dbrs.com or contact us at info@dbrs.com.

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