Lagos Nigeria, 20 February 2020–Global Credit Ratings has accorded a servicer quality rating of SQ3(NG) to Purple Real Estate Development Company Limited; with the outlook accorded as Stable. The rating is valid until October 2020.
SUMMARY RATING RATIONALE
Global Credit Ratings (“GCR”) has accorded the above credit ratings to Purple Real Estate Development Company Limited (”PREDCO” or “the Company”) based on the following key criteria:
The servicer quality rating accorded to Purple Real Estate Development Company Limited (“PREDCO” or “the Company”) reflects its relatively short track record (less than five years) and the uniqueness of its operation with asset under management comprising only a commercial property, Maryland Mall Limited (“MML”), owned by a related entity.
Sufficient agency capacity: PREDCO’s special servicing entails mainly collection of rents and other accrued payments on behalf of MML and receives commission for the service rendered. Although operational track is considered short, management have demonstrated sufficient capacity and no delinquency in collection have been recorded till date.
Stable management team: The staffing level is considered adequate based on the nature and scale of the Company’s operation presently. The Company is managed by one of the major shareholders, supported by a relatively stable team.
Good financial performance: Key performance metrics improved significantly in FY18, largely supported by income from sale of property (a major non-servicing related income stream). As such, pre-and post-tax profits reported new highs of N114.9m and N55.2m respectively. Though operating expenses grew by about 165% during the period, cost ratio stood at a lower 33.8% (FY17: 50.5%). Also, performance as at 3Q FY19 displayed an improvement over FY18’s position (net of income from property sale).
Adequate system and control environment: Available systems and control is considered adequate and supportive of current operational scale. PREDCO’s operation is supported by ‘Tenancy Management Software’ which track payments and invoices on daily basis. Also, cloud system backup is place which avails the Company the opportunity for online real-time disaster recovery.
An upward movement in the rating may follow the establishment and sustenance of good track record. However, a decline in financial performance or weakening in servicing capacity could impact the rating negatively.
NATIONAL SCALE RATINGS HISTORY
Initial/last rating (January 2020)
Servicer quality rating: SQ3(NG)
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APPLICABLE METHODOLOGIES AND RELATED RESEARCH
Global Criteria for rating Banks and Other Financial Institutions, updated March 2017
Glossary of Terms/Ratios, February 2016
RATING LIMITATIONS AND DISCLAIMERS
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the ratings were influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or earlier as indicated by the applicable rating document.
The ratings above were solicited by, or on behalf of, Purple Real Estate Development Company Limited, and therefore, GCR has been compensated for the provision of the ratings.
Purple Real Estate Development Company Limited participated in the rating process via a face-to-face management meetings and written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible.
The ratings have been disclosed to Purple Real Estate Development Company Limited.
The information received from Purple Real Estate Development Company Limited and other reliable third parties to accord the ratings included the latest audited annual financial statements as at 31 December 2018, unaudited management accounts to 30 September 2019, annual accounts of Maryland Mall Limited as at 31 December 2018, and other related documents.