Nordic Credit Rating (NCR) said today that it had affirmed its 'A-' long-term issuer rating on Swedish public-property manager Vacse AB (publ). The outlook is stable. At the same time the 'N-1+' short-term rating and 'A-' senior unsecured issue rating were also affirmed.
Rationale
The long-term issuer rating reflects the company's strong portfolio of modern, tailor-made properties leased on long contracts to highly creditworthy public-sector authorities that are essential to Sweden's public security. It is supported by Vacse's strong financial position, low risk appetite, and relatively moderate leverage. We consider Vacse's approach to sustainability a supportive factor in our assessment of its property portfolio, primarily because we expect demand from government tenants for sustainability credentials to increase as Sweden strives to meet its commitments to the Paris Agreement.
These strengths are somewhat offset by the limited number of Vacse's properties (19) and tenants, with the top 10 tenants generating virtually all of the company's revenues. We believe Vacse's tenant concentration creates some risk at contract expiry, though this is low as only 16% of the company's contracts (by value) expire within the next three years.
Stable outlook
The stable outlook reflects our expectation that Vacse will continue to focus on similar types of properties and tenants, and long lease terms. We expect the company to keep development projects at around 5% of the overall portfolio by area and maintain its low-risk financial profile. The outlook reflects our expectation that the company will continue to obtain certification of new properties and maintain its proactive attitude towards sustainability. It also reflects our stable economic outlook for Sweden's wider community-service sector.
We could raise the rating if Vacse shows significant portfolio growth and diversification without compromising its low-risk business profile and credit metrics. We could lower the rating if net loan to value reaches levels above 45% and EBITDA/net interest stays below 5.0x over a protracted period, or if Vacse deviates from its low-risk business profile.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | A- | A- |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N-1+ | N-1+ |
| Senior unsecured issue rating: | A- | A- |
If you have any questions, please contact:
Mille O. Fjeldstad, credit rating analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Yun Zhou, credit rating analyst, yun.zhou@nordiccreditrating.com
The methodology documents used for this rating are NCR's Rating Principles published on 16 Sep. 2019 and NCR's Corporate Methodology published on 14 Aug. 2018. For the full regulatory disclaimer please see the rating report.
NCR - Vacse_AB_publ - Full Rating Report 12 Oct. 2021.pdf (414.51 KB) NCR - Vacse_AB_publ - Rating Action Report 12 Oct. 2021.pdf (228.84 KB) Vacse AB (publ) A - Stable Real estate N-1+ Off On Off