Our 'BB-' issuer rating on Stendörren Fastigheter AB (publ) (Stendörren) is unchanged following the publication of its first-quarter results.
Increased focus on new leases supports revenues
Stendörren's first-quarter report was in line with our expectations. Revenues in the quarter were SEK 161m (compared with SEK 158m in the first quarter of 2020) and EBITDA was SEK 93m (SEK 97m), corresponding to an EBITDA margin of 57.8% (61.4%) for the period. The net operating income margin was 68.9% (74.7%) for the quarter and 72.5% (68.1%) for the last 12 months.
The average remaining lease term in Stendörren's portfolio was 3.7 years, while the occupancy rate was 88%, an increase from 87% a quarter earlier. An increased focus on new leases supported revenue in the first quarter and appears likely to bolster prospects for the full year.
During the quarter, one of the company's larger tenants, Exploria AB, was declared bankrupt. Stendörren had already accounted for potential loss of revenues from the tenant and consequently the bankruptcy had no material effect. The company still receives some revenues from the property in question and expects to find new tenants once the bankruptcy proceedings have been finalised. Since the end of the quarter, Stendörren has decided to proceed with the development of 350 apartments in the Botkyrka area, near the property leased by Exploria AB. The company aims to apply for a building permit before mid-year.
Stendörren acquired one property during the quarter, an 8,600 sqm fully let warehouse in Västerås with a remaining lease term of seven years, and one property after the end of the quarter, a 6,298 sqm industrial and warehouse property in Eskilstuna.
Metrics improve slightly but Botkyrka development likely to increase leverage
Stendörren's NCR-adjusted loan-to-value (LTV) ratio (including 100% debt treatment of hybrid bonds) was 58.2%, a decrease from 60.6% a year earlier. The NCR-adjusted EBITDA to net interest ratio was 2.0x, an increase from 1.7x a year earlier. Cash holdings amounted to SEK 278m at the end of the quarter. The average interest rate was 2.1%, while the average debt maturity was 2.8 years and the average interest fixing was 2.3 years. While the company reported stronger-than-expected credit metrics, we expect the Botkyrka development to increase leverage and consequently do not adjust our estimates.
Figure 1. Stendörren key credit metrics, 2017–Q1 2021
SEKm | 2017 | 2018 | 2019 | 2020 | LTM to 31 Mar. 2021 |
---|---|---|---|---|---|
Total revenue | 453 | 537 | 592 | 651 | 655 |
NCR-adj. EBITDA | 265 | 304 | 309 | 374 | 391 |
NCR-adj. investment properties | 6,494 | 8,476 | 9,372 | 9,758 | 10,093 |
NCR-adj. net debt | 3,684 | 5,166 | 5,703 | 5,763 | 5,872 |
Total assets | 6,624 | 8,735 | 9,608 | 10,233 | 10,471 |
NCR-adj. debt/EBITDA | 13.9x | 17.0x | 18.5x | 15.4x | 15.0x |
NCR-adj. EBITDA/interest | 2.5x | 2.3x | 1.7x | 1.9x | 2.0x |
NCR-adj. LTV | 56.7% | 60.9% | 60.9% | 59.1% | 58.2% |
This commentary does not constitute a rating action.
If you have any questions, please contact:
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Marcus Gustavsson, credit rating analyst, +46700442775, marcus.gustavsson@nordiccreditrating.com