Our 'BB-' long-term issuer rating for Offentliga Hus i Norden AB (publ) (Offentliga Hus) is unchanged following the publication of its first-quarter results.
Continued growth and rental revenues paid in full
The Q1/20 report for Offentliga Hus was mostly in line with our expectations. Revenues were SEK 121m (compared to SEK 70m in Q1/19) and EBITDA was SEK 65m (SEK 35m) corresponding to an EBITDA margin of 54% for the quarter (51%). During the quarter, Offentliga Hus acquired two properties totalling 12,700 sqm entering their portfolio from April 2020, increasing the portfolio to 219 properties valued at SEK 7.3bn. The company has externally valued approximately 25% of its property portfolio, and has not made any value adjustments. The occupancy ratio decreased somewhat to 94% during the quarter and the remaining lease term is 4.7 years. We note that 15% of the contract revenue matures during 2020. The company noted that all revenues were received for the second quarter according to plan, and has yet to notice any affect of the response to COVID-19.
Financial position remains stable, credit metrics in line with the rating
Offentliga Hus reported secured loan to value (LTV) of 45.4%. We treat the SEK 575m hybrid bond issued during Q4/19 as 50% debt affecting net debt and net interest costs whilst the company categorises the hybrid as equity in their financial metrics. As such, NCR adjusted credit metrics differ from those used by the company and in its covenants. NCR adjusted LTV was 64% as of 31 Mar. 2020, interest coverage ratio of 1.5x, commensurate with our financial risk assessment for the company. The company increased its cash position during the quarter from SEK 117m to SEK 226m and first upcoming maturity is a SEK 700m bond maturing June 2021.
Continued focus on strengthening the organisation and listing
Offentliga Hus affirmed its plans of listing the company during 2020, and has during the quarter continued strengthening its organisation adding three new employees focusing on real estate management and transactions, and economy. The company also added two new members to its Board of Directors, focusing on sustainability and property law.
This commentary does not reflect a rating action.
If you have any questions, please contact:
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Daniel Johansson, credit rating analyst, +46732324378, daniel.johansson@nordiccreditrating.com