Our 'A-' issuer and issue ratings on Swedish property company Vacse AB (publ) (Vacse) are unchanged following the publication of its third-quarter results.
Revenues remain stable
Vacse's third-quarter report was in line with our expectations. Revenues in the quarter were SEK 93.7m (compared with SEK 95.2m in the third quarter of 2019) and EBITDA was SEK 74.9m (SEK 73.8m), corresponding to an EBITDA margin of 80% (78%) for the quarter. Some 98% of revenues come from tenants funded by the government or official agencies, with 82% coming directly from the central government, and 16% from regions and municipalities. Privately funded commercial tenants account for the remaining 2%.
Vacse reported a continued strong interest coverage ratio of 5.6x as of 30 Sep. 2020. The company's property portfolio and development projects have not been affected by COVID-19 and are progressing in line with our expectations. The first tenants at Vacse's largest project, Färgskrapan, started moving in during September and, in October, the company announced that agreements covering most of the complex's remaining vacancies had been signed by the Public Prosecutor's Office, Åklagarmyndigheten, reducing the vacancy rate at the property to only 2%. The average remaining lease term of the overall management property portfolio was 10.8 years at the end of the quarter and we expect it to remain at around this level as new contracts come on stream due to finalisation of projects and acquisitions over the next few years. The overall occupancy rate is above 99%, with the Färgskrapan project accounting for all of the vacancies.
Financial position continues to strengthen
During the second quarter, Vacse secured financing options for upcoming acquisitions in December 2020 and April 2021 by extending and increasing an unutilised revolving credit facility. Since then, the company has increased a senior unsecured bond maturing in 2024 by SEK 200m through a tap issue, effectively covering the first acquisition. The average time to maturity is 3.4 years for external debt and 4.9 years for interest. Secured debt to total debt was 39% at end-September.
Vacse's liquidity position remains strong. The company reported SEK 106m in cash and equivalents as of 30 Sep. 2020. There are no upcoming debt maturities until a SEK 700m green bond matures on 7 Jun. 2022, and available revolving credit facilities more than cover the upcoming acquisition in April 2021. The loan-to-value ratio decreased to 39.0% during the third quarter.
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