Fitch Ratings has upgraded Stoneweg European REIT (SEREIT)’s long-term issuer default rating to ‘BBB’ from ‘BBB-’, and assigned a stable outlook.
Fitch has also upgraded the trusts’ EUR500 million unsecured and unsubordinated six-year notes due Jan 2031 and the EUR1.5 billion medium term note programme to ‘BBB’ from ‘BBB-’.
“The upgrade reflects SEREIT's improved portfolio quality, combined with our expectations that the trust's EBITDA net leverage will remain below 8.0x,” reads the release by Fitch. “We expect SEREIT will continue asset refurbishments and recycling of non-core properties or those with limited growth prospects, and use the proceeds to fund capex. We believe these efforts will generate steady like-for-like rent and cash flow growth over the medium -term.”
Key rating drivers for Fitch include SEREIT’s redevelopment plans to lift portfolio quality, including the spending of EUR30 million in general capex.
Fitch notes that SEREIT is funding its redevelopment and asset enhancement initiatives (AEIs) by disposing of non-core assets, allowing it to maintain a steady financial profile in line with its ratings. The REIT also has a steady leverage, and modest development exposure, Fitch adds.
Fitch forecasts that the ebitda net leverage will stabilize at around 7.5 times in the medium term, supported by asset disposals to fund capex. Leverage rose temporarily to 8.1 times in 1HFY2025, as the trust invested EUR50 million in a 6.7% stake in AiOnX, its sponsor's data centre development fund.
See also: IREIT Global refinances EUR200 mil German portfolio
Key assumptions that has led to Fitch’s rating includes an annual CPI indexation of around 2% over the next few years; positive rent reversions of 8% for logistics and industrial and 13% for office properties in 2025; flat revenue in 2025; capex of around EUR170 million during 2025-2028; significant opportunistic disposals in 2025-2026 as part of ongoing portfolio rejuvenation.
SERT, formally known as Cromwell European REIT before the change in sponsor, has a portfolio valued at EUR2.3 billion comprising over 100 predominantly freehold properties in or close to major gateway cities in the Netherlands, Italy, France, Poland, Germany, Finland, Denmark, Slovakia, the Czech Republic, and the United Kingdom.
The portfolio spans a total lettable area of approximately 1.7 million sqm and serves more than 800 tenant-customers.
Units in SEREIT closed 2 cents higher or 1.333% up at $1.52 on Oct 3.
