Moody's affirmed Swedish real estate company Kungsleden AB's Ba1 long-term corporate family rating, with a positive outlook.
The affirmation reflects Kungsleden's improving performance, as well as a positive and gradual shift in the quality of its property portfolio. The ratings action is also supported by a strong fixed charge coverage of 4.1x and a rise in the company's unencumbered assets to 31% as at Dec. 31, 2018, from 2% in September 2017, according to the report.
The rating agency estimates the company's leverage, as measured by total debt/gross assets, to improve to 45% over the next two quarters, which would protect Kungsleden from any future industry downturn that affects the investment market more quickly than the occupier market.
The positive outlook reflects Moody's expectation that the company will keep loan to value below 50% and improve leverage while continuing to grow unencumbered assets.
The outlook also includes the rating agency's expectation that Kungsleden will maintain the generation of stable cash flows and work on improving the quality of its portfolio, as well as work toward prolonging lease maturity and adopting a balanced growth strategy.