S&P Global Ratings has assigned Stoneweg European Real Estate Investment Trust (Stoneweg E-Reit) a “BBB-” long-term issuer credit rating, as it expects the trust to deliver stable operational performance and cash flow over the next two years.
On Friday (Jan 10), S&P said it is positive that the “sound quality” of Stoneweg E-Reit’s portfolio will translate into a healthy occupancy rate.
The agency noted that the Reit’s logistics and industrial properties, which account for 55 per cent of its portfolio, are likely to attract “high-quality tenants”, given their accessibility and connectivity.
The trust’s office buildings, which made up 43 per cent of its portfolio as at end-2024, are also likely to benefit from tenants’ flight to quality, given their strategic locations and green credentials, said S&P.
While office leasing activity remains weak amid ongoing work-from-home arrangements, the agency expects this to be mitigated by Stoneweg E-Reit’s long-lease maturity profile.
It highlighted that the Reit had a weighted average lease expiry profile of 4.4 years as at end-September 2024, as well as a tenant retention rate of 88 per cent.
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S&P therefore expects positive rental reversions for the Reit’s office buildings over the next two years, except in Poland and Finland, where office sentiments are weaker.
It also believes that Stoneweg E-Reit’s earnings will continue to be supported by the trust’s lease structures and the growing logistics and industrial properties market.
S&P said: “The Reit’s logistics and industrial assets are well-positioned for third-party logistics and distribution. This segment will continue to benefit from the ongoing, albeit slowing, adoption of e-commerce.”
The low vacancy rate of 4.4 per cent in its Europe logistics and industrial assets is also likely to contribute to positive rental reversions in the next two years, said the agency.
It also expects the Reit to maintain an Ebitda (earnings before interest, tax, depreciation and amortisation) interest coverage of between 2.6 and 2.8 times.
The Reit’s debt-to-Ebitda ratio is projected to come in at 7.6 to 7.8 times in 2025 to 2026, said S&P.
Units of Stoneweg European Reit were trading 0.6 per cent or 0.01 euro lower at 1.58 euros as at 1.25 pm on Friday.
