Ger­man residential com­pa­nies’ credit qual­ity to re­main ro­bust, says Moody’s

Financial Mirror (Cyprus) - - FRONT PAGE -

Ger­man residential prop­erty com­pa­nies’ credit qual­ity will re­main strong over the next 12-18 months on the back of steady rental growth, low in­ter­est rates and con­ser­va­tive fi­nan­cial poli­cies aimed at re­duc­ing lever­age, Moody’s In­vestors Ser­vice said.

“Ris­ing rents cou­pled with con­ser­va­tive fi­nan­cial poli­cies will un­der­pin and strengthen Ger­man residential prop­erty com­pa­nies’ credit met­rics

through 2016,” said Roberto Pozzi, au­thor of the re­port.

Deutsche Wohnen A.G. (A3 sta­ble) will ben­e­fit the most from ris­ing rents, re­flect­ing its large ex­po­sure to metropoli­tan ar­eas where pos­i­tive de­mo­graphic changes and lim­ited con­struc­tion of new dwellings are driv­ing the high­est rental growth, such as Ber­lin, Frank­furt and Mu­nich.

Deutsche Wohnen and Grand City Prop­er­ties S.A. (Baa2 sta­ble) will con­tinue with their con­sol­i­da­tion strat­egy be­cause of the large cost sav­ings that go with in­creased scale.

With only 7-8% of to­tal hous­ing units owned by pro­fes­sional pri­vate prop­erty com­pa­nies, the Ger­man residential mar­ket re­mains highly frag­mented and of­fers abun­dant op­por­tu­nity for port­fo­lio growth via ac­qui­si­tions. Con­versely, LEG Im­mo­bilien AG (Baa1 sta­ble) will re­main more fo­cused on or­ganic growth.

Deutsche Wohnen’s com­mit­ment to keep­ing lever­age at 40-45% will sup­port its credit qual­ity, whilst Grand City Prop­er­ties has pub­licly stated that it in­tends to main­tain its loan-to-value at 50%.

Re­flect­ing their more con­ser­va­tive fi­nan­cial poli­cies, Ger­man residential com­pa­nies are now tar­get­ing lever­age be­low 50% (ver­sus tra­di­tional 50%55%), sup­ported by solid as­set val­ues.

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