Nordic Credit Rating said today that it had affirmed its 'BBB-' long-term issuer rating on Norway-based property manager OBOS Eiendom AS. The outlook is stable. The 'N3' short-term issuer rating and the 'BBB-' issue rating on the company's senior secured debt were also affirmed.
Rating rationale
The long-term issuer rating reflects OBOS Eiendom's relatively solid property portfolio in generally attractive locations. Our assessment is supported by the strong fundamentals of the Oslo area, which accounts for almost all of OBOS Eiendom's rental income. We view the company's long lease terms and solid operating margins as positive.
These strengths are offset by the modest size of OBOS Eiendom's property portfolio, albeit mitigated by a market position bolstered by the company's close ties with its parent, residential property developer OBOS BBL. Portfolio concentration is relatively high, which we view as a weakness. The company's concentrated project development pipeline, which includes speculative elements, also tempers our evaluation. We expect OBOS Eiendom's key credit metrics to weaken in the short term as the company makes substantial investments in project development, although we expect this effect to be mitigated by property divestments.
Our assessment factors in OBOS Eiendom's relationship with OBOS BBL. We view OBOS Eiendom as a 'vital' component of the OBOS BBL group (as defined in our Group and Government Support Rating Methodology), due to a strong parent-subsidiary link, resulting from a long history of integration and a shared name. We add one notch of ownership support to our 'bb+' standalone credit assessment of OBOS Eiendom to bring the long-term rating on the company into line with our 'BBB-' long-term rating on OBOS BBL.
Stable outlook
The stable outlook reflects the outlook on our long-term issuer rating on OBOS BBL. Given our view of OBOS Eiendom as 'vital' to the OBOS BBL group, we could revise our rating on the company due to changes in our issuer rating on the parent.
We could raise the rating to reflect an improvement in the credit quality of the overall OBOS BBL group.
We could lower the rating to reflect a change in ownership or a deterioration in the credit quality of the overall OBOS BBL group, or a reduction in the company's strategic importance to OBOS BBL.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB- | BBB- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N3 | N3 |
| Senior secured issue rating: | BBB- | BBB- |
Contacts:
Anine Gulbrandsen, analyst, +4797501657, anine.gulbrandsen@nordiccreditrating.com
Yun Zhou, analyst, +46732324378, yun.zhou@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@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.