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Rating action

Scope Ratings GmbH (Scope) has today affirmed the issuer rating of Norwegian Property ASA (NPRO) at BBB-/Negative. Scope has concurrently affirmed the BBB ratings on the following senior secured bonds: NO0013350538, NO0013251801, NO0013251827, and NO0013270348.

Despite increased pressure from credit metrics, as indicated by the lowered financial risk profile, NPRO‘s standalone rating remains at BBB-. The rating continues to be supported by the stability of the company’s business risk profile. Scope acknowledges that although the financial risk profile flags greater risk, the increased pressure on credit metrics is expected to be addressed in the next couple of months.

The Negative Outlook therefore reflects the heightened risk that credit metrics will remain below the level required for the current rating beyond 2025. Scope has also affirmed the rating on the senior secured bond instruments.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BBB- (unchanged). NPRO’s business risk profile continues to be supported by its substantial market share of Grade A office space in sought-after locations in the Oslo area. Its portfolio has stabilised since the major acquisition of Telegrafen in the Central Business District (CBD) and the takeover of Martin Linges Vei 33 in Fornebu. The WAULT remained stable at 6.0 years in Q2 2025, outperforming the market average of four years. However, EPRA vacancy surged to 9.8% in Q2 2025 from 6% in the previous quarter. This was because Tietoevry, the company's fourth-largest tenant, vacated its premises in Fornebu. High profitability, as measured by a Scope-adjusted EBITDA margin* of over 82% (LTM Q2 2025), coupled with low volatility, provides strong support to the issuer’s business risk profile.

Limited geographical diversification with a focus on the Oslo area remains a constraint. Tenant concentration is high, with the top three and ten largest accounting for 31% and 47% of total rental income as of the second quarter of 2025, respectively. The dominant tenants are Telenor (15.7% compared to 17.6% last year) and Equinor (10.7%). Tenant concentration remains a credit risk, even beyond the two largest tenants. This is evident from the recent departure of NPRO's fourth largest tenant, Tietoevry, and its subsequent impact on vacancy rates and cash generation. In Scope’s view, concentration risk are partially mitigated by: i) the young age of NPRO’s portfolio and its high proportion of BREEAM-certified buildings (ESG factor: credit-positive), which facilitate leasing, as well as the high credit quality of Telenor and Equinor; and ii) the implied investment-grade credit quality of the remainder, based on historical default statistics and broad tenant industry diversification.

Financial risk profile: BB (revised from BB+). NPRO’s financial risk profile has deteriorated over the last 12 months. Based on Scope’s discussions with management, the company is aware of potential rating pressures and is reviewing options to support its credit quality.

Leverage, measured by the loan/value (LTV) ratio, has remained stable at 53% since the large acquisitions made in Q4 2023/Q1 2024. Slight increases in the fair values of NPRO’s properties were offset by a small rise in interest-bearing debt. The debt/EBITDA ratio has decreased to 12.7x in Q2 2025 from 13.7x a year ago, helped by an increase in EBITDA from new properties and CPI-linked rent adjustments.

In its last review, Scope expected interest coverage to weaken to 1.8x by the end of 2024, which has materialised at 1.7x. The expensive loan in connection with the takeover of Martin Linges Vei 33 (since refinanced) and the debt-financed acquisition of Telegrafen increased debt levels significantly at a time of high interest rates. This was only somewhat mitigated by a smaller-than-anticipated equity raise of NOK 0.5bn for each of the two transactions.

NPRO has a financial policy of hedging 50%–100% of all variable-rate debt at all times and has a track record of around 65% macro hedging (60% as at end-June 2025). This dampens the negative effect of new borrowing in a high-interest rate environment; however, the 40% floating portion still weighs on interest coverage. Interest cover therefore stands at 1.6x as at end-June 2025. While Scope expects a recovery going forward as EBITDA increases while interest rates fall, the recovery will begin from a lower starting point, exerting significant pressure on the company's financial risk profile.

Both the still-elevated leverage and the deteriorated interest cover necessitate capital measures in Scope’s view.

Capex cover remains a strength, with the company having achieved free operating cash flow (FOCF) averaging NOK 250m over the last five years. Given the company’s young portfolio, Scope does not anticipate significant investment requirements, except for adaptations related to tenancies. As such, Scope foresees a continuation of positive FOCF. The company has demonstrated solid internal financing capacity, with structurally neutral-to-lightly positive FOCF across the investment cycle.

Liquidity: adequate (unchanged). As of end-June 2025, NPRO has NOK 308m in cash, NOK 2bn in available undrawn facilities, and expected FOCF of NOK 130m over the next 12 months. This only partially covers the remaining upcoming maturities of NOK 1.8bn in 2025 and NOK 4.1bn in 2026. However, Scope considers liquidity risk to be manageable for the following reasons: i) all outstanding debt is secured on properties with a current LTV ratio of 53%, and NPRO can draw down new debt under existing bonds/facilities up to an LTV of 65% at issuance. This significantly minimises refinancing risk; ii) NPRO has proven access to capital and the banking markets, as evidenced by its frequent issuance of debt, and it is willing to raise equity if required; and iii) NPRO has a relatively well-diversified maturity profile, and its financial policy is such that no more than 20% of total debt matures within the next 12 months on a rolling basis.

Supplementary rating drivers: credit-neutral (unchanged). Scope has made no adjustment for other supplementary rating drivers such as financial policy, parent support, or governance and structure.

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Negative Outlook reflects the increased risk that credit metrics will remain below the level required for the current rating beyond 2025. This includes EBITDA interest coverage below 2.2x and an LTV above 50%. Scope considers it unlikely that the company’s credit metrics will materially improve through normal operations alone. Nonetheless, Scope acknowledges that management is evaluating ways to support credit quality over time.

The upside scenarios for the ratings and Outlook are (individually):

1. LTV improving towards 50%
    
2. EBITDA interest cover improving to 2.2x or above

The downside scenarios for the ratings and Outlook are (individually):

1. Failure of LTV to improve towards 50%
    
2. EBITDA interest cover remaining below 2.2x

Debt ratings

Scope has affirmed the rating on the company’s senior secured bond instruments, based on the underlying issuer rating of BBB-/Negative. The senior secured notes benefit from a first-ranking pledge on specific properties. In the event of a hypothetical default, additional pro rata proceeds from any liquidation proceeds would be distributed pari passu among all holders of senior secured debt.

Environmental, social and governance (ESG) factors

Several new ESG reporting requirements were introduced into legislation in Norway in 2022. NPRO reports in accordance with the Transparency Act and the Equality and Anti-Discrimination Act, and also reports its climate report according to the GHG Protocol, including Scope 1, 2 and 3. NPRO has set environmental targets in line with the UN SDGs, with a base year of 2019 and a target year of 2025: 5%-10% reduction in energy consumption for the existing portfolio (achieved), 10%-20% reduction in CO2 equivalents (CO2 emissions per sq m reduced to 6kg in 2024 from 14kg in 2019) and 60%-65% for sorted waste (67% achieved in 2024). As part of its ESG strategy, NPRO aims to have all its properties achieve a BREEAM rating or BREEAM-in-Use of ‘Very Good’ or better by 2026. Approximately 81% of all office, retail and restaurant space is already certified, increasing the attractiveness of the portfolio and strengthening asset quality, which will support rental growth and stable cash flow in the future (ESG factor credit positive).

All rating actions and rated entities

Norwegian Property ASA

Issuer rating: BBB-/Negative, affirmation

Senior secured debt instruments rating (NO0013350538): BBB, affirmation

Senior secured debt instruments rating (NO0013251801): BBB, affirmation

Senior secured debt instruments rating (NO0013251827): BBB, affirmation

Senior secured debt instruments rating (NO0013270348): BBB, affirmation

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; European Real Estate Rating Methodology, 2 June 2025), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Thomas Faeh, Executive Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 28 April 2022. The Credit Ratings/Outlook were last updated on 26 September 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
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