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20. Apr 2017 Rating news  – Closed-end Funds

Scope rates closed-end alternative investment fund IMMAC 84. at aAIF

The rating is driven positively by lease agreements extending beyond the planned duration of the fund and the very good Asset Management Rating of HKA Hanseatische Kapitalverwaltung AG.

The investor participates in a retail AIF that holds two nursing homes located within 50 km of each other in Lower Saxony, Germany. The facility in Seesen was built in 1997 with 155 care places, but the operator aims to reduce this number to 136. The second facility was built in Hardegsen in 1992, with additions to the building constructed in 1996. As in the Seesen facility, the number of care places in Hardegsen will be reduced from 154 to 130 in order to increase the single-room ratio.

In both locations, contracts were made with a single leaseholder, DOREA, active on the market since 2015. These contracts are for 20 years, which outlast the fund’s maturity. The total investment volume is EUR 27.5m, of which EUR 12.2m is financed through senior debt, making the fund’s debt ratio 44.4%. Initial costs comprise around 21.7% of equity, in addition to an agio of 5%.

Scope anticipates a return of 4.25% p.a. with a downside volatility of 2.11%. The fund’s risk-return ratio is expected to generate a good risk-adjusted return according to Scope’s estimates.

The rating is driven positively by:

  • Lease agreements extending beyond the planned duration of the fund
  • Fixed debt financing over 10 years with a comparatively high amortisation rate
  • Completed transfer of ownership of both properties
  • Scope’s very good Asset Management Rating of HKA Hanseatische Kapitalverwaltung AG

Scope has identified the following risk drivers:

  • Comparatively limited diversification due to the close proximity of the properties and the same leaseholder
  • Limited repurposing potential of the care facilities
  • Refinancing risk after 10 years
  • Leaseholder’s probability of default
  • Locations in a structurally weak region with increased competitive pressure resulting from new construction at the Seesen facility
  • High initial costs compared with retail AIF peers’

Scope’s analysis has yielded the following figures:

  • Break-even probability: 98.48%
  • Probability of losses: 1.52%
  • Value at risk: 4.61% (a loss of 4.61% is not exceeded in 99.9% of all simulations)
  • Risk class: 4

HKA Hanseatische Kapitalverwaltung AG is the market leader in the area of closed-end funds for the healthcare-oriented real estate segment. An Asset Management Rating by Scope of AAAMR is also available as of 8 November 2016.

Regulatory and legal disclosures

Important information
The rating of investment funds expresses the opinion of Scope Analysis GmbH on the risk-return profile of the investment fund as a provider of capital for a project or asset. As far as the term “asset management company” is used, this applies to asset management companies, investment companies, management companies and investment advisory firms.
Scope Analysis GmbH is not a rating agency subject to Regulation (EG) Nr. 1060/2009 as amended by Regulations (EU) Nr. 513/2011, (EU) Nr. 462/2013 (together, ‘the rating agency regulations’) and is not registered as a rating agency subject to the rating agency regulations. The rating of investment funds is not a rating subject to the rating agency regulations and therefore cannot be used for regulatory purposes by credit institutions, investment firms, insurance companies, reinsurance companies, institutions for occupational pension provisions, management and investment companies, managers of alternative investment funds, and central counterparties.
Ratings prepared by Scope Analysis GmbH is not a recommendation to purchase or sell an investment fund and do not express an opinion over the value of investment funds.

Responsibility
The party responsible for the dissemination of the above rating is Scope Analysis GmbH, Berlin, District Court for Berlin (Charlottenburg) HRB 97933 B with its office in Lennéstraße 5, 10785 Berlin, and an executive board composed of Florian Schoeller, Torsten Hinrichs and Dr Sven Janssen.
Rating was prepared by Frank Netscher, Senior Analyst, Lead Analyst.
Responsible for approving the preparation of rating: Harald Berlinicke, Director, Committee Chair

Rating history
20.04.2017 | Initial Rating | aAIF
14.03.2017 | Affirmation | (P) aAIF
29.11.2016 | Preliminary rating | (P) aAIF

Information on interests and conflicts of interest
The rating was prepared independently by Scope Analysis GmbH however, for a fee as set out in the mandate of the issuer of the investment fund. HKA Hanseatische Kapitalverwaltung AG has paid for the right to reproduce and redistribute the preceding rating, rating summary and the Scope rating seal. When Scope Analysis GmbH issues an Asset Management Rating for an issuer of an investment fund, the corresponding result or ongoing updates can lead to an adjustment to the rating result of the aforementioned investment fund. The issuer paid for the right to use the analytical database of Scope Analysis GmbH in the following areas: Closed-end investment funds. The issuer has commissioned Scope Analysis GmbH for an Asset Management Rating for a fee.

Key rating sources
Prospectus - Website of issuer - Investment information sheet - Annual / interim financial statements of the investment fund - Current balance sheet - Detailed information provided on request - Data provided by external providers - External appraisals - Interview with asset management company - Press reports / other public information
Scope Analysis GmbH ensured as far as possible that the information underlying the investment fund rating is of satisfactory quality and comes from reliable sources, but did not verify each item of information as specified in the sources independently.

Review by customer before publication of rating
Before publication, the customer was given the opportunity to review the rating and the main factors for the rating decision (rating drivers), including the underlying, summarised justifications for the rating of the investment fund (Rating rationale). The customer was finally given at least one full working day to indicate any factual errors or to appeal the rating decision and provide additional, important information for the rating. The rating report was adjusted on the basis of this review. The rating was not adjusted.

Methodology
The methodology applicable for the rating closed-end investment funds is available on www.scopeanalysis.com.

Conditions of use/exclusion of liability
Scope Analysis GmbH prepares, with the necessary duty of care, its independent and objective rating on the risks and opportunities of the rated investment fund as of the date the rating is issued. Future events are therefore regarded as uncertain. Forecasts are based on estimates; hence, a rating does not represent a factual claim, but merely an opinion, which can also subsequently change and result in a rating adjustment. Scope Analysis GmbH is therefore not liable for damages resulting from decisions made from using the issued rating. The rating provided by Scope Analysis GmbH is not a recommendation to either purchase or sell an investment fund. The rating can only be seen by all involved parties as a factor in the investment decision and cannot replace the investor’s own analyses and assessment. The rating therefore only represents an opinion on the relevant risk-return profile of the relevant investment fund and does not under any circumstances provide a judgment on the risk-return profile of an investment and makes no indication as to whether involved parties will: make a profit, have invested capital returned or enter into specific risks of liabilities by investing in the investment fund. The rating is not an assessment of an investment fund’s creditworthiness and does not express an opinion on the value of the investment fund.
Scope Analysis GmbH is of the assumption that in issuing a rating, the documents and information made available are complete and correct, and that the copies submitted were unaltered and completely reflect the content of the originals. Therefore Scope Analysis GmbH does not give any guarantee for the accuracy and completeness of information used.
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Contact
Scope Analysis GmbH,
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10785 Berlin
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Contact

Scope Analysis GmbH    Phone: +49 (0)30 27891-0
Frank Netscher    f.netscher@scopeanalysis.com
Sonja Knorr    s.knorr@scopeanalysis.com
André Fischer    an.fischer@scopeanalysis.com