DBRS Limited (DBRS Morningstar) placed the Senior Unsecured Debentures rating of CT Real Estate Investment Trust (the Trust) and the Issuer Rating of CT REIT Limited Partnership (CT REIT LP; collectively with the Trust, CT REIT) Under Review with Negative Implications. This rating action was the result of DBRS Morningstar placing the ratings of Canadian Tire Corporation, Limited (CTC) Under Review with Negative Implications on April 7, 2020 (see DBRS Morningstar press release “DBRS Morningstar Places Canadian Tire Corporation Under Review with Negative Implications”).
This rating action reflects DBRS Morningstar’s view that CT REIT’s credit risk profile and ratings are aligned with those of CTC, largely because CTC is the majority owner of CT REIT and is also the dominant tenant of CT REIT, among other reasons. Changes in CTC’s rating would typically have a direct effect on CT REIT’s ratings.
While CTC does not provide explicit support to CT REIT, DBRS Morningstar assesses the level of CTC’s implicit support to CT REIT LP to be strong based on the following considerations:
(1) CT REIT LP’s properties are essential to the operation of CTC as CT REIT LP is CTC’s dominant landlord for the foreseeable future.
(2) There are substantial contractual arrangements between CT REIT LP and CTC, including long-term lease agreements, services, and property management agreements.
(3) CTC’s effective ownership of CT REIT was approximately 69.4% of CT REIT’s equity as at December 31, 2019.
(4) The reputational risk implications of CT REIT to CTC are high, given their strong interconnections.
(5) Integration between CTC and CT REIT is strong through strategies, operations, and oversight.
DBRS Morningstar will resolve the Under Review with Negative Implications status of CT REIT when the Under Review with Negative Implications status of CTC is resolved.
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.
All figures are in Canadian dollars unless otherwise noted.
The principal methodologies are Rating Entities in the Real Estate Industry, Rating Companies in the Merchandising Industry, DBRS Morningstar Criteria: Guarantees and Other Forms of Support, and DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships, which can be found on dbrsmorningstar.com under Methodologies & Criteria.
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
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 email@example.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 trends and ratings are under regular surveillance.
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