The credit rating of CITY PJSC (the Company), acting as an exclusive management company for MIBC Moscow-City under the General Agreement with the Government of Moscow, reflects a range of factors. On the one hand, the rating is supported by the long-term contract for managing an important infrastructure located in the largest business district of the capital city and owned by Moscow. This implies that the Company's operations will remain stable and highly profitable. On the other hand, the rating is limited by the small business size of the Company as compared to the scope of the entire corporate sector, medium score for market position, and low score for corporate governance. The Company has plans to construct, using bank project finance arrangements through its subsidiary City-Development LLC, a multi-purpose complex with a total area of 174.6 thousand sq. m. The Company's credit rating takes this project into account.
CITY PJSC is a managing company focused on maintenance and development of the utility and transport infrastructure of MIBC Moscow-City, landscaping and major repairs of the territory, management of parking lots and traffic within the territory of the business center. The Company also manages a portfolio of premises and land plots owned by Moscow, including the unique Moscow City Museum located on the 58th floor of the Imperia business complex. ACRA has no information about the ultimate beneficiary of the Company.
Key rating assessment factors
The medium score for market position factors in the limited area of real estate managed by the Company, though such situation is generally typical of an industry where there are no network management companies having a portfolio of real estate with a wide geographic diversification. The Company manages MIBC Moscow-City and only infrastructure items that belong to Moscow (mainly parking areas, roads, and points of entry and exit). The market position assessment also takes into account the promising leased areas owned by City-Development LLC, a subsidiary of the Company.
The medium business profile reflects the current business of the Company and a promising project for managing a multi-purpose complex. The sub-factor score is a result of the low diversification of properties managed by the Company by both asset and lessee. Today, about 60% of the Company's income is generated by parking lot leases (at least 85% of lots are leased out, but lease contracts are short term). In the future, the management of the multi-purpose business complex assumes long-term lease contracts for over 10 years, which is positive for the "quality of lease contracts" sub-factor. However, the presence of a mono-lessee limits the score for the "asset and lessee diversification" sub-factor. According to the Company's expectations, the occupancy of the business center will be about 100%.
The very high score for the geography of presence stems from that the Company manages MIBC Moscow-City, the country-largest business center located in Moscow and one of the largest business centers in the world.
The corporate governance factors are assessed by ACRA as average for the Russian corporate sector. This is due to the constrained development strategy of the Company, which is linked to the prospects of a single business center, as well as the absence of approved financial and dividend policies and code of corporate governance. There are no independent directors on the Company's board, and the ownership structure is complex and non-transparent. The financial transparency is low since the Company publishes no consolidated financial statements under either IFRS or RAS.
The financial risk profile is assessed by ACRA at bbb- due to the Company's small business size (annual NOI is less than RUB 5 bln), medium profitability, leverage and liquidity, and very weak FCF.
- Continued performance of functions of a company managing MIBC Moscow-City (in accordance with the General Agreement with the Government of Moscow);
- Implementation of a multi-purpose business center project by City-Development LLC in accordance with the business plan.
Possible outlook or rating change factors
The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
- Better business profile based, including more diversified (in terms of number and geography) properties under the Company's management;
- Larger business size, including a successful implementation of the multi-purpose business center project.
A negative rating action may be prompted by:
- Termination of functions of a company managing MIBC Moscow-City (under the General Agreement with the Government of Moscow);
- Insufficient funding for the multi-purpose business center project.
No outstanding issues have been rated.
The credit rating has been assigned to CITY PJSC under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Non-Financial Corporations under the National Scale for the Russian Federation, and Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities.
A credit rating has been assigned to CITY PJSC for the first time. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.
The credit rating was assigned based on the data provided by CITY PJSC, information from publicly available sources, as well as ACRA’s own databases. The credit rating was assigned based on the RAS financial statements of CITY PJSC. The credit rating is solicited, and CITY PJSC participated in its assignment.
No material discrepancies between the provided data and the data officially disclosed by CITY PJSC in its financial statements have been discovered.
ACRA provided no additional services to CITY PJSC. No conflicts of interest were discovered in the course of credit rating assignment.