DBRS Morningstar Confirms Rating on Mortgage Loan Made to Morguard Corporation & 131 Queen Street Limited

DBRS Limited (DBRS Morningstar) confirmed the rating on the following mortgage loan made to Morguard Corporation & 131 Queen Street Limited (the Borrower) by a major Canadian financial institution:

-- 5.31% Mortgage Loan Due November 1, 2026 at AAA

The trend is Stable.

The rating confirmation reflects the overall stable performance of the transaction since DBRS Morningstar’s last review. The loan is secured by the Borrower’s leasehold interest in a mixed-use building at 131 Queen Street in Ottawa. DBRS Morningstar’s current rating on the mortgage loan reflects an analytical approach which gives additional amortization credit based on the rating of the credit tenant, the Government of Canada (rated AAA with a Stable trend by DBRS Morningstar), which occupies the entire office portion of the property. Built in 2006, the property is a 13-storey building comprising 312,486 square feet (sf) of office space, 16,776 sf of retail space, and 36 furnished residential apartments. The subject is well located in downtown Ottawa and benefits from its close proximity to Parliament Hill, the courthouse, and public transit.

According to the March 2022 rent roll, the office component continues to be fully leased to the Government of Canada. The tenant is on a triple net lease through August 2026, two months prior to the loan maturity date, and the retail portion was 80.5% occupied while the residential portion was 69.4% occupied. The property is managed by Morguard Corporation (rated BB (high) with Stable trend by DBRS Morningstar). DBRS Morningstar’s current rating on the loan takes into consideration the Government of Canada’s credit quality. The net cash flow from the tenant’s lease is sufficient to cover the financial obligations of the Borrower with respect to the mortgage loan. Any change to DBRS Morningstar’s rating on the tenant during the loan term is expected to have an effect on the rating of the mortgage loan.

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.

DBRS Morningstar notes that this press release was amended on May 10, 2023, to clarify the relationship of the subject rating to the Government of Canada’s credit rating.

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

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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.

This rating was initiated at the request of the lender.

The rated entity or its related entities did not 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.

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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