Fitch upgrades Klépierre’s ratings, reflecting strength in European portfolio

Investing.com -- Fitch Ratings has upgraded the Long-Term Issuer Default Rating (IDR) of Klépierre SA to ’A-’ from ’BBB+’ on April 23, 2025. The senior unsecured rating was also upgraded to ’A’ from ’A-’, while the Short-Term IDR was affirmed at ’F1’. The outlook on the Long-Term IDR is stable.

The upgrade is a reflection of the strength of Klépierre’s European portfolio of quality shopping centers. The average annual rent rise of 4.2% in the period of 2022-2024’s re-letting and renewals, which is above contractual indexation, played a significant role in this decision. Klépierre’s choice of tenant mix, spotting ever-changing retail trends and undertaking re-investment has positioned its shopping centers for steady growth.

Klépierre’s financial profile remains stable, with a loan-to-value (LTV) below 40%, Fitch-calculated net debt/EBITDA below 8x, and net interest cover around 5.5x for the period 2024-2028. The two opportunistic shopping center acquisitions in 2024 did not impact Klépierre’s financial headroom and disciplines.

The company’s tenant mix has been a part of its success, targeting sectors like athleisure apparel, health and beauty, less high fashion, all complemented by dedicated food and beverage in its shopping centers. By the end of 2024, these sectors represented 19%, 15%, 37% and 12% of the portfolio’s tenants’ sales respectively.

Klépierre’s large retail portfolio benefits from diversification across several European economies, including France at 38%, Italy 23.5%, Scandinavia 12%, Iberia 12% and the Netherlands/Germany/Central Europe at 14.4% of portfolio value at the end of 2024. The portfolio valuation’s net initial yield (NIY) was unchanged at 5.9%.

In May 2024, Klépierre acquired RomaEst, Rome, and in February 2024, it acquired a 25% stake in the distressed-financed O’Parinor shopping center, Paris. The total acquisition cost of both properties was EUR237 million and both properties yield double-digit cash returns.

Klépierre’s capital structure is not aggressive, with a loan-to-value (LTV) of below 40%, Fitch-calculated net debt/EBITDA below 8x and net interest cover of around 5.5x. The company’s unsecured rating above its IDR reflects expected higher recoveries for the asset class, its unencumbered investment property assets/unsecured debt of above 2.0x and Fitch-calculated secured debt/total debt at less than 20%.

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