Nordic Credit Rating (NCR) has affirmed its 'BBB' long-term issuer rating on Sweden-based community service property manager Intea Fastigheter AB (publ). The outlook is stable. The 'N3' short-term issuer and 'BBB' senior unsecured issue rating were also affirmed.
Rating rationale
The affirmation reflects our expectations of timely completion of projects and lengthened contract durations within Intea's operating portfolio, enhancing revenue visibility and improving operational cash flows. The company's average remaining lease term stood at 8.1 years as of the first quarter of 2025, compared with 6.4 years in the first quarter of 2024 due to a number of new builds, expanding its operating portfolio. We expect Intea's completion of new properties with high energy efficiency and strong cash flows will drive improvements in profitability. Intea's larger operating portfolio, with a higher share of newly builds, positively influences our view of its asset quality. We anticipate the company will continue adding projects to its pipeline, with cash outflows for ongoing projects moderately exceeding annual operating earnings, and the shortfall financed through additional debt. We expect property values to be robust, with positive fair value changes linked to the project portfolio, driven by the healthy yield gap of these assets. These factors underpin our view that net loan-to-value (LTV) will increase towards 53.5% by the end of 2027.
The company has significantly extended its interest-fixing period in recent quarters. We expect the interest-fixing duration to increase slightly due to restructured swap contracts in the second quarter of 2025. The fixed-interest period was 4.6 years at the end of first-quarter 2025, compared to 2.4 years at the end of the third quarter of 2024. This reduces the company's sensitivity to interest rate changes, increases predictability of interest costs and funding costs of its projects. In our view, Intea's financing costs are nearing long-term sustainable levels, which, along with improved cash flows from operations, results in a strong rebound in interest coverage expected at 2.6─3.1x over the next three years.
We believe Intea's debt maturity profile will remain front-loaded in the near term, with a liquidity profile weaker than its investment grade peers, who typically have committed liquidity sources exceeding expected cash outflows. The company is primarily funded with senior unsecured debt, resulting in low asset encumbrance, which can serve as an alternative source of liquidity if necessary. Intea is expected to proactively refinance its debt maturities and lengthen the debt maturity profile, as financing has become more accessible at longer tenors. We expect the company, however, to have a substantial part of its funding from commercial paper which increasing sensitivity to changed funding conditions.
Stable outlook
The stable outlook reflects our expectation that Intea's net interest coverage is likely to remain comfortably within our rating requirements over our forecast period through 2027 and that property values will remain robust. It also reflects our expectation that the company will continue to have strong access to capital markets and will not make changes to its low-risk business profile by broadening project development exposure or make changes to its low-risk business profile.
We could raise the rating to reflect improved credit metrics, with net LTV below 50%, net debt/EBITDA below 10x and net interest coverage above 3.0x over an extended period, together with improved debt maturity and liquidity profile. The rating could also be raised following significantly reduced property concentration and lower project development exposure, together with improved debt maturity and liquidity profile.
We could lower the rating if Intea's key credit metrics weaken, with net LTV above 55% and interest coverage below 2.2x. We could also lower our rating if the company increases its project development exposure without improving its liquidity management and long-term capital structure. Lastly, we could downgrade Intea if we perceived a negative change in financial risk management or change in risk tolerance.
Related publications
i) Swedish real estate snapshot (Q4 2024): growth is back on the menu, 4 Mar. 2025.
ii) Swedish real estate outlook 2025, 23 Jan. 2025.
iii) Intea Fastigheter AB (publ) 'BBB' long-term rating affirmed; Off watch; Outlook stable, 12 Dec. 2024.
iv) Comparison of NCR-rated community service property managers, 9 Dec. 2024.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB | BBB |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N3 | N3 |
| Senior unsecured issue rating: | BBB | BBB |
Contacts:
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.