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Moody's downgrades Gewobag Wohnungsbau-AG Berlin rating

Moody's downgraded its issuer rating on Gewobag Wohnungsbau-AG Berlin to A2 from A1, with the outlook remaining stable.

The rating agency also downgraded the baseline credit assessment of the German state-owned social housing provider to baa1 from a3.

The downgrade was based on the significantly faster increase in the company's debt level than expected due to its acquisition of nearly 6,000 units from ADO Properties SA to increase its portfolio.

Gewobag's credit profile represents a strong chance of securing support from the Land of Berlin in line with its policy mandate to provide affordable housing in the city.

Moody's noted that Gewobag's rent-related revenues from current stock could still increase by an average of about 1.2% annually over the next 10 years despite a proposed law aimed at freezing and capping rents in Berlin at predetermined levels for five years.

The stable outlook represents the agency's expectation that the company will be able to sustain its operating margin and adopt a conservative business plan.