CAPITALAND INVESTMENT LIMITED
Fitch Ratings has assigned
The Outlook is Stable.
The rating is underpinned by the trust's high-quality portfolio of Grade A offices in
Our rating case has not factored in any equity raising, as this will be subject to market conditions. Our expected peak EBITDA net leverage is above the level for CLINT's current rating, but we acknowledge that it has a number of levers and leverage could be lower than our forecast. In particular, CLINT has an established record of prudently managing development risks, as well as strong credit- and equity-market access that has allowed it to maintain a healthy capital structure with gearing (debt/total assets) of below 40%.
Key Rating Drivers
High-Quality Office Portfolio: CLINT's property portfolio consists mainly of business parks with Grade A offices in five top-tier cities in
Fitch forecasts that CLINT's portfolio will maintain blended occupancy rates of around 90%-92%, driven by mature existing assets in the mid- to high-90s range, even as partly leased new properties are commissioned. We estimate base rental income from existing assets to increase to
High Development Exposure: CLINT has a large pipeline of asset development and acquisitions via forward purchases, and will grow its floor area to 30.2 million sq ft by 2030, from 21 million sq ft as of
Well-Managed Development Risk: The trust's developments are exposed to leasing risk, as they are not pre-committed. CLINT manages this risk by only acquiring assets after they have achieved a minimum occupancy rate. It can acquire the asset at a discount if the occupancy is lower than agreed upon. All acquisitions were previously completed at a minimum 50% occupancy rate, which was then ramped up over 12-to-24 months. We expect execution risk to be manageable, with the support of the experienced asset-management team backed by its sponsor,
Temporary Increase in Leverage: We expect EBITDA leverage to peak at 8.5x in 2025 before tapering off to around 7.0x as a result of high capex from DC developments and forward purchase commitments in 2024 and 2025. Leverage will improve to below our estimates if the trust raises equity to partially fund capex as planned, but that is subject to market risk. We have factored in potential proceeds in 2024 from the disposal of two of CLINT's mature but smaller non-core assets for capex funding.
CLINT has maintained a gearing ratio of below 40% in the past and has demonstrated an ability to raise equity to fund capex, such as the issuance of
Concentrated Property Portfolio: CLINT's portfolio is concentrated, with the top 10 assets comprising more than 93% of asset value and its largest property, International Tech Park Bangalore, accounting for 28% of total assets under management as of
Positive DC Sector Trends: We expect CLINT's foray into DC development to improve the portfolio's growth potential and diversification. We expect strong growth in demand for DC space in
Partly Unhedged Foreign-Currency Risk: CLINT has some exposure to unhedged foreign-currency risk, as its revenue is generated solely in Indian rupees. The trust's financial policies state that 30%-50% of its debt will be denominated in
Manageable Interest-Rate Exposure: We expect CLINT will be able to manage interest-rate risk, supported by a high fixed-rate debt ratio of 71% at
Derivation Summary
CLINT's rating can be compared with that of
CLINT and CEREIT are rated at the same level. CEREIT's
The two trusts have similar financial profiles, but CLINT has much higher development exposure, resulting in tighter sensitivities than CEREIT.
SGREIT has a stronger business profile than CLINT, supported by its stable cash flow from long-dated master leases and the prime locations of key properties. SGREIT has a weighted-average lease length of 7.9 years, which is much longer than CLINT's 3.4 years. SGREIT's higher occupancy rate and negligible development exposure more than offset its higher asset and tenant concentration risk. As a result, SGREIT is rated one notch higher than CLINT.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
Revenue of
EBITDA of
50% of management fees, paid in units, to be added back to EBITDA due to their non-cash nature
Development capex and forward purchase commitments of around
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating action is unlikely, given CLINT's large development exposure compared to higher-rated peers.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
EBITDA interest coverage below 2.0x for a sustained period
EBITDA net leverage above 8.0x or loan/value ratio above 50% for a sustained period
Liquidity and Debt Structure
Adequate Liquidity, Strong Funding Access: CLINT had a reported cash balance of
We expect its 2024 liquidity ratio to increase to 1.3x after the repayment of outstanding revolvers, and committed and near-final construction loans. CLINT also has
Issuer Profile
CLINT is a
Date of Relevant Committee
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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