S&P rates Consus Real Estate notes B-

S&P said it assigned a preliminary B long-term issuer credit rating to Consus Real Estate AG and a preliminary B- rating with a preliminary 5 recovery rating to the group's proposed €400 million senior secured notes.

Consus is one of the largest German residential property developers, the agency said, and operates with a conservative forward-sale business model.

Following the group's recent business transformation, S&P said it expects its currently high leverage to decline gradually over the next 12- to 24 months on the back of planned forward-sold projects.

The stable outlook reflects a view that Consus' debt-to-EBITDA ratio will improve closer to 5x over the next two years thanks to favorable market fundamentals and strong demand for residential properties in Germany, the agency said.

The ratings are underpinned the company's recently transformed corporate structure, making the group one of the largest residential developers in Germany, S&P said.

The agency said it considers the inherent volatility and cyclicality of the real estate developer industry in the highly fragmented German residential property market.

The company's concentration solely to Germany could make the company vulnerable to changes in German regulation and tax incentives, and therefore affecting investors' interest in the market, S&P said.

The ratings are constrained by the group's lack of a track record as an operating entity, given the group's recent business transformation, the agency said.

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