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Rating action

Scope Ratings GmbH (Scope) has today downgraded the issuer rating of Corem Property Group AB (Corem) to BB+/Stable from BBB-/Negative.

The downgrade from investment grade reflects Corem’s weaker interest cover and asset quality despite ongoing efforts to strengthen its financial position. At Q3 2025, Scope-adjusted EBITDA interest cover* was at 1.7x and leverage (loan/value, ‘LTV’) at 54%; while occupancy rates were at 85% and weighted average unexpired lease term (WAULT) 3.2 years. The revision to Stable Outlook reflects the positive effect from countermeasures consisting of ongoing asset sales and the refinancing of expensive debt to relieve financial pressure.

While Scope acknowledges these measures, the pace of deleveraging, the alleviation of the interest burden and the current earnings headroom are not sufficient to sustain an investment grade rating.

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). The business risk profile reflects Corem’s good market position in the Swedish commercial real estate industry. The company remains well diversified across major Swedish metropolitan areas with some international exposure. However, Scope sees lower asset quality amid portfolio optimisation through divestments constrains the rating, while profitability remains broadly stable.

Corem has a gross lettable area of around 2.1m square metres as of Q3 2025, with SEK 51.4bn of assets under management maintaining a strong market position across its core Swedish regions, including Stockholm, Linköping, Gothenburg, and Malmö. The company’s footprint is geographically diverse, supporting a well-balanced property portfolio in terms of both asset value and rental income. This diversification is reinforced by a broad tenant base of roughly 2,900 unique tenants per Q3 2025, with the top three accounting for 10.6% of rental income and the top 10 for 18% per year-end 2024. While concentration risk is increasing slightly, this is partially offset by the good credit quality of the majority of the tenants.

Asset quality has weakened, primarily due declining occupancy rates and shorter WAULT. Despite around 72% of the company’s properties being located in ‘A’ locations and exposed to major, liquid property markets such as Stockholm, Gothenburg, Copenhagen and New York, the company is facing vacancy pressure. After remaining stable at around 89% during 2016–2022, the occupancy rate declined to around 85% as of 2023 through to Q3 2025, falling short of the long-term target of 90%. Similarly, the WAULT shortened from an average of 3.8 years during 2016–2022 to about 3.3 years in 2024 and 3.2 years in Q3 2025. The combined negative momentum of shorter leases paired with lower occupancy rates results in re-letting risk to compound, increasing uncertainty. This can lead to weaker financial metrics as asset valuation may decline further, pressuring LTV upwards. The reletting risk a shorter lease term presents is partly mitigated by the strong average length of tenancies, at 15 years. This indicates tenant loyalty despite the shorter renewal periods.

Profitability is expected to remain stable as the EBITDA margin was 65% in Q3 2025 despite the number of property disposals. Scope expects a flat or slightly negative development for 2025-2027 at 64%-65% based on a triple net margin (considering utilities that are ‘billed through’) from lower rental income, in light of the ongoing divestments and the pressure from falling occupancy rates.

Financial risk profile: BB (revised from BB+). The company’s financial risk profile has deteriorated. Significant asset disposals have weakened EBITDA and rental income, in turn reducing operating cash flow and limiting deleveraging through earnings. While these disposals support liquidity and improve LTV, they also constrain recurring income and interest cover, increasing the reliance on external measures to maintain credit stability.

Since 2022, Sweden’s real estate sector has faced a costly capital market environment, driven by a rapid surge in interest rates (base rate: 3M STIBOR) to around 4% from near zero, coupled with widening credit spreads that have periodically rendered the bond market unattractive. As a result, Corem, along with other companies with short debt durations, was compelled to pursue refinancing at elevated costs, significantly increasing the interest burden. After interest rates were reduced, last adjusted in October 2025 to 1.75%, leveraged companies have had more attractive refinancing opportunities, aided by the contracting of credit spreads.

Scope expects Corem’s EBITDA interest cover at around 1.6x in 2025 (from around 1.9x in 2024), reflecting both the higher average funding costs and the reduced EBITDA following property sales and a weaker office market in Sweden. Although recent rate cuts should gradually reduce interest expenses, the high hedging level of 74% renders interest costs partly inflexible, leaving operational performance as an important driver for potential volatility. Still, Scope expects a modest recovery of EBITDA interest cover to around 1.9x by 2027. The agency’s view is based on refinancing at more attractive terms following the Swedish Riksbank’s rate cuts, continued margin compression and further debt repayments from the proceeds of asset sales. It also takes into account the fact that the share of swaps is decreasing in line with debt levels.

Leverage remains elevated as measured by debt/EBITDA at 14x–15x (2024: 15x) in the forecast period, underscoring the limited deleveraging achieved through operating performance. LTV is expected to improve to 51%–52% in 2025-2027 from 54% at Q3 2025, supported by asset disposals. The benefit of these asset sales has yet to materialise as deleveraging typically precedes improvements in other credit metrics, such as cash flow and interest coverage.

Free operating cash flow remains good for 2025, forecasted at SEK 3.7bn, driven by large amounts of asset disposals of SEK 4.5bn. Capex, which pertains mainly to planned refurbishments and necessary maintenance is projected at SEK 1.3bn in 2025, reduced to cover only necessary projects around SEK 0.65bn annually in 2026–2027. This results in a free operating cash flow/debt at 13% in 2025. Subsequently, Scope expects Corem to demonstrate a free operating cash flow that is close to breaking even, with capex being largely covered by operating cash generation. Current dividend levels are expected to be maintained for 2026 and 2027.

Liquidity: adequate (unchanged). Corem’s liquidity position is adequate though somewhat constrained. The available cash sources comprising SEK 0.3bn in cash and SEK 2.6bn in committed undrawn credit lines as at Q3 2025, reduced by forecasted negative free operating cash flow of SEK 0.1bn over the next 12 months, do not fully cover upcoming cash uses, notably SEK 12.4bn in short-term debt maturing within the same period.

However, Scope considers the risk of liquidity to be manageable in the short to medium term. The agency’s view is based on the following: Firstly, the company’s unencumbered property pool amounts to SEK 24.4bn in Q3 2025. These assets provide ample opportunity to increase debt on unused collateral. Secondly, in Q3 of 2025, Corem’s secured LTV was 44%, enabling the company to increase debt on existing properties should access to the short-term debt market be limited. Thirdly, Scope considers it unlikely that banks will not refinance secured loans pledged in real estate with LTVs below the banks' requirements and assumes that secured debt maturities in 2026 and 2027 will be rolled over. Fourthly, maturing bonds totalling SEK 1.0bn and commercial paper totalling SEK 1.4bn are covered by the current combined cash and uncommitted portion of the SEK 2.7bn revolving credit facilities. Lastly, Corem has demonstrated continued access to diverse funding channels, including the regular issuance of commercial paper, bonds and equity, as well as robust banking relationships across a broad lender base.

Supplementary rating drivers: credit-neutral (unchanged). The rating has no adjustments related to financial policy, governance and structure, parent/government support, or peer group considerations.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that interest coverage will bottom out at around 1.7x by 2025, before improving. Furthermore, the Outlook reflects a broadly unchanged leverage despite further asset sales, as well as the company’s continued access to external financing, which will facilitate the refinancing of maturing debt.

The upside scenarios for the rating and Outlook are (collectively):

1. EBITDA interest cover to improve to or above 2.2x
    
2. LTV not significantly exceeding 50%

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

1. EBITDA Interest cover below 1.5x on a sustained basis
    
2. Weaker business risk profile due to i) further asset sales, which could result in lower profitability and/or ii) lower asset quality due to limited investments in the portfolio

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action

All rating actions and rated entities

Corem Property Group AB

Issuer rating: BB+/Stable, Downgrade

*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 this Credit Rating 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 Rating if the Credit Rating was 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 Rating: 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 the Credit Rating 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 Rating and/or Outlook and the principal grounds on which the Credit Rating and/or Outlook is based. Following that review, the Credit Rating and/or Outlook was not amended before being issued.

Regulatory disclosures
The Credit Rating and/or Outlook is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating and/or Outlook is UK-endorsed.
Lead analyst: Eirik Loevdal Tollefsen, Associate Director
Person responsible for approval of the Credit Rating: Philipp Wass, Managing Director
The Credit Rating/Outlook was first released by Scope Ratings on 15 July 2021. The Credit Rating/Outlook was last updated on 23 December 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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