September 18, 2018 (MLN): JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed Real Estate Investment Trust (REIT) Rating of Dolmen City REIT (DCR) at ‘RR1’ (REIT Rating One). Outlook on the assigned ratings is ‘Stable’
According to the rating agency, the funds rated in “RR1” Category are judged to be of highest investment quality.
Current rating of the closed-end Dolmen City REIT fund derives strength from its exposure in two properties namely the Dolmen Mall and The Harbour Front (office building). As per industry dynamics, the properties enjoy competitive advantage based on their location, provision of amenities, high quality maintenance services and security.
Since inception, both properties have experienced high occupancy levels while the mall continues to exhibit a diversified tenancy profile and increasing footfall. Tenant risk, as manifested in concentration levels, is high in case of Harbor Front.
Although client concentration is considered high, however, comfort is drawn from strong financial profile of clients, the report further added.
Given that the property continues to hold a strong competitive position, risk of variation in occupancy levels is considered low. As per management, occupancy levels will only be sensitive to greater competition from comparable properties (if any) with similar facilities management, over the long term.
Moreover, sustaining occupancy levels will be a key driver for investment returns, particularly if economic growth faces slowdown.
However, assurance of returns over the foreseeable horizon is considered high. In the backdrop of an increasing interest rate scenario, ability of the fund to maintain competitive returns will remain a key rating driver, the report concluded.
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