DBRS Morningstar Confirms The MaRS Development Trust at A (high), Stable Trend

DBRS Limited (DBRS Morningstar) confirmed the rating of the Senior Secured Bonds (the Bonds) issued by The MaRS Development Trust (MaRS Trust or the Issuer) at A (high) with a Stable trend, following the rating confirmation of the University Health Network (UHN; rated AA (low) with a Stable trend by DBRS Morningstar; see the July 22, 2020, DBRS Morningstar press release for UHN). The MaRS Trust rating reflects the following factors: (1) the credit strength of UHN, which is responsible for servicing the Bonds through a credit tenant lease; (2) the structural subordination of the lease supporting the Bonds relative to the UHN bonds, as UHN bondholders benefit from a security interest in the bulk of incoming UHN cash receipts; and (3) a comprehensive security package that includes a charge on project assets, the UHN lease, various reserve accounts, and insurance policies. Secured debt-to-total debt at UHN was 40.8% at March 31, 2020. As UHN's secured debt amortizes and becomes de minimis (i.e., less than 10% of total debt), structural subordination would no longer apply.

The $100 million proceeds from the first and only bond issue of MaRS Trust were used to finance the acquisition of lands (the Lands) and the construction of the 400,000-square-foot (sf ) Princess Margaret Cancer Research Tower (previously the Toronto Medical Discovery Tower; the Project). Construction began in February 2003 and was completed in August 2005, with costs coming in slightly below budget. The Project has been leased to UHN for a period of 30 years, which corresponds to the term of the Bonds. During this time, UHN will provide rent payments sufficient to service the Bonds as well as cover all operating and maintenance costs.

The Project, along with other existing buildings on adjoining land, is part of an overall effort by MaRS Discovery District to establish a place where the academic, research, and business sectors from Canada’s science and technology industry can come together to help stimulate innovation, entrepreneurship, and the creation of successful global businesses. Given that the credit profile of MaRS Trust is linked to that of UHN, any revisions to the rating of the latter would trigger an equal move in the rating of MaRS Trust.

ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

The principal methodology is the North American Single-Asset/Single-Borrower Ratings Methodology (March 1, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

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@dbrsmorningstar.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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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