Fitch Ratings has assigned Turkey's Is Real Estate Company (IS REIC) a Long-term National rating of A and a stable outlook.
The rating is underpinned by IS REIC's sizeable investment property portfolio relative to its peers in Turkey and its quality assets. A strong cash flow, after interest expense, during the last two years has been aided by a capital structure funded by equity and an absence of tax and dividend payments. The rating also takes into account the company's modest leverage ratios, said Fitch.
As the largest Turkish property company by assets, IS REIC is able to be a serious bidder for acquisitions in Turkey by leveraging its name, reputation and the high quality of its assets. Nevertheless, the office market is extremely fragmented as Turkish property companies remain price takers and vulnerable to economic cycles. In this regard, Fitch's rating reflects the fact that IS REIC has a limited ability to influence price.
The company's investment portfolio, which constituted the majority of its profit before interest and taxes in 2002 should partially support the financial burden of its property development activities over the next three to five years. IS REIC's $92 million development program is currently dominated by the Kanyon project, a mixed use project which consists of open air shopping areas, an office tower and residential units.
As the residential units in this development are not contractually pre-sold but built on a speculative basis, the agency has made cautious assumptions in its evaluation of the project. However, assuming an increasing financial burden in the future from possible delays in letting and sales and increased construction costs, IS REIC's financial profile remains well supported by the underlying investment property portfolio and the leverage ratios for 2004 and 2005 should be consistent with the company's ratings.
In assigning its rating, Fitch assessed the credit-worthiness of IS REIC on a stand alone basis. Despite some operational benefits being provided by its 61.68 percent ownership by Isbank, Fitch's rating has not taken into consideration the possibility of support from the bank to IS REIC in times of financial difficulty.
The agency notes that Isbank has made considerable non-financial investments and that Is Group's own funding plans may be substantial.
IS REIC is a property company with a $325 million property investment portfolio, which is purely Turkish based and concentrated in Istanbul and Ankara. Although the portfolio is dominated by office property at 59 percent, the company is looking to diversify further into the tourism/leisure sector.
Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated AAA and other credits are rated only relative to this risk. Specific letter grades are not internationally comparable. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
