Ronesans Gayrimenkul Yatirim upgraded to BB- by Fitch

Investing.com -- Fitch Ratings upgraded Turkish property company Ronesans Gayrimenkul Yatirim A.S.’s (RGY) Long-Term Foreign Currency Issuer Default Rating to ’BB-’ from ’B+’ with a Stable outlook.

The upgrade reflects strong performance of RGY’s 12 shopping centers in Turkiye during 2024, which saw a 10% year-on-year increase in footfall. This led to tenant sales growth exceeding hyperinflation rates and nearly full occupancy by year-end.

The company’s revenue and EBITDA grew significantly, supported by turnover-linked rent contracts. Leverage decreased sharply following debt repayments using IPO proceeds.

RGY’s EBITDA interest coverage improved to 2.2x at end-2024 from 1.3x at end-2023. The partial sale of Maltepe offices in May for about €17 million and debt refinancing completed earlier this year have enhanced the company’s financial flexibility.

The property firm reduced its net debt/EBITDA ratio to 3.5x at end-2024 from 7.4x at end-2023. EBITDA increased by 90% in 2024 as rental revenues outpaced hyperinflation, with nearly all contracts linked to turnover rents.

RGY is focusing on attracting higher-profile tenants to increase footfall and rental growth. With an occupancy cost ratio of 9.3%, management sees potential for rental growth above inflation, targeting 13%.

The company plans to invest 5%-10% of net operating income annually in refurbishing its portfolio for 2025-2028. A significant portion is allocated to Maltepe Park in 2024, with enhancements including new restaurants, cafes and sports areas.

RGY continues to face currency risk, with 97% of its debt denominated in euros at end-2024 while rental revenues are primarily in Turkish lira. Turnover rents provide some natural hedge against this risk.

Fitch noted that RGY’s rating is unlikely to exceed Turkiye’s ’BB-’ rating. Potential downgrade factors include failure to address refinancing risk, weakening Turkish economic conditions, net debt/EBITDA above 7x, or reduced headroom in secured debt covenants.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.