DBRS Confirms CT REIT LP’s Issuer Rating and CT REIT’s Senior Unsecured Debentures Rating at BBB (high)

DBRS Limited (DBRS) has today confirmed the Issuer Rating of CT Real Estate Investment Trust Limited Partnership and the Senior Unsecured Debentures of CT Real Estate Investment Trust (collectively, CT REIT) at BBB (high), both with Stable trends.

The ratings continue to be based on DBRS’s view that the credit risk profiles of CT REIT and Canadian Tire Corporation, Limited (CTC; rated BBB (high) by DBRS) are aligned (see CTC report dated September 29, 2015, for rating considerations). The alignment is primarily because of the following: (1) CTC currently owns approximately 83.8% of CT REIT’s equity and effectively controls CT REIT as its major shareholder; (2) CTC is CT REIT’s dominant tenant for the foreseeable future, representing approximately 96.7% of CT REIT’s annualized base minimum rent (including all CTC banner stores) for the year ended Q4 2015 (YE2015); (3) CT REIT’s portfolio of properties represents approximately 78.0% of all of CTC’s owned real estate assets by square feet (sf) of gross leasable area (GLA) as at YE2015; (4) the appraised value of CT REIT’s total assets represents approximately 29.0% of CTC’s consolidated assets as shown on its balance sheet as at
YE2015; and (5) CT REIT’s leases with all CTC banner stores have a weighted-average (WA) lease term to maturity of approximately 13.6 years and CT REIT’s leases with CTC’s distribution centre have a WA remaining lease term of 14.2 years.

CT REIT’s credit risk profile could be assessed on a stand-alone basis should CTC’s ownership and/or control in CT REIT diminish materially over time. The ratings of CT REIT could also move independently of CTC, without a meaningful reduction of ownership, if CTC no longer represents a material proportion of CT REIT’s portfolio by size of tenancy. DBRS believes that CT REIT possesses attributes (i.e., size, asset quality, geographic diversification, financial leverage and interest coverage) on a stand-alone basis that would be characteristic of an investment-grade credit, but at the lower end of the range. CT REIT’s ratings could not exceed CTC’s credit rating should CTC remain the predominant tenant.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Companies in the Merchandising Industry (August 2015), which can be found on our website under Methodologies.