Hemso Fastighets AB

Overview Key strengths Key risks A relatively large property portfolio worth Swedish krona (SEK) 84.4 billion as of Sept. 30, 2023, comprising stable community service properties such as nursing homes (38% of gross asset value [GAV]), educational facilities (36%), health care facilities (15%), and the justice system (11%). Relatively high leverage compared to rated European peers, with debt to debt plus equity of just below 65% as of Sept. 30, 2023, and debt to EBITDA of about 15x. Positive underlying demographic trends such as the expanding and aging population, supporting high occupancy rates of 97%-98% and a long average lease duration of nine-to-10 years, providing cash flow stability and predictability High geographical concentration, with 63% of assets located in Sweden.

...Hemso Fastighets AB (Hems÷)'s recent announcement of further equity injections by its shareholders is rating supportive, however, leverage headroom remains tight. S&P Global Ratings understands that the company's management and shareholder are committed to its financial target of a maximum loan-to-value ratio (LTV) of 60% (reported LTV of 59.2% as of Sept. 30, 2023), which corresponds to adjusted debt to debt plus equity of below 65%. We expect continued support from the company's shareholders, which injected SEK 1 billion of equity in September 2023 and have recently announced plans to provide another SEK1 billion in first-quarter 2024. In addition, we anticipate that Hems÷'s smooth expansion plans, amid significant market uncertainty, will keep its leverage in line with its financial policy in the next 12- 24 months. Including the recently announced capital injection, a devaluation of about 5%-6% in 2023 and flat the years after, we forecast Hems÷ can maintain some headroom under our...

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