Fitch Affirms Kramont Realty Preferred Stock Rating.

Business Editors

NEW YORK--(BUSINESS WIRE)--Aug. 28, 2000

Fitch has affirmed its 'BB-' rating for $45 million convertible and perpetual preferred stock reissued by Kramont Realty Trust (NYSE:KRT), a company formed through the June, 2000 merger of Kranzco Realty Trust and CV REIT, Inc. The rating, previously assigned to preferred stock of Kranzco, is removed from Rating Watch Evolving where it was placed on Dec. 12, 1999. The Rating Outlook is Stable.

Kramont is a self-managed equity REIT engaged in the ownership, redevelopment, management and leasing of community and neighborhood shopping centers. Through its operating partnerships, Kramont currently owns 84 properties (approximately 11 million square feet of gross leasable area, or GLA) in 16 states, with total assets approaching $800 million as of June 30, 2000.

Merger-related credit positives include increased portfolio size and tenant diversity, succession of company leadership, and strengthened leasing capabilities and asset repositioning expertise. Kramont's primary credit strength remains the stable cash flow provided by its portfolio of grocery and discount store anchored community centers, which benefits from repeat shopping for necessity-type goods and services, in-fill locations with above-average barriers to entry, and manageable near-term lease expirations totaling less than 50% over the next five years.

These strengths are balanced by Kramont's constrained financial flexibility and moderate fixed charge coverage capacity. Additional rating concerns include potential post-merger integration and transition issues, geographic concentration in the northeast, and uncertainty regarding management's commitment to self-fund acquisitions and revenue-enhancing capital expenditures through asset sales.

Fitch considers the fit between the Kranzco and CV REIT portfolios to be good, as both companies had focused on similar property types and regions. Properties in the Northeast will contribute a pro-forma 69% of Kramont's net operating income (NOI), with concentrations in Pennsylvania (39%, up from 29% for Kranzco), New Jersey (12%), Georgia (12%), and Connecticut (8%). Grocery and discount department stores represent approximately 45% of GLA. Tenant diversity remains good, with Kramont's top 15 tenants representing 29% of total rent, including Wal-Mart (5.6% of rental income), Kmart (3.7%) and Stop & Shop (2.7%). Anchor creditworthiness is considered to be average, with approximately 16% of rental income from investment grade tenants.

The restructured senior management team, with Louis Meshon Sr. as CEO, addresses previous Fitch concerns regarding succession issues and further expands the ranks of management with experience in acquiring and repositioning underperforming centers. By internalizing leasing for all of the Kranzco portfolio, the new management team also demonstrates a commitment to more pro-active leasing and asset management. Since the merger announcement, management has leased approximately 450,000 square feet of unoccupied GLA. Fitch expects that Kramont will continue to focus its value-added expertise on the existing portfolio, which includes approximately 750,000 square feet of unleased GLA and 500,000 square feet of leased but unoccupied GLA.

Financial protection measures for preferred shareholders remain strained by debt leverage and limited access to public capital sources other than mortgage debt, but are considered adequate for the rating category. As of June 30, Kramont's debt leverage was 68% of total market capital (67% based on undepreciated book capital), and 75% including preferred stock. Pro-forma EBITDA to interest coverage is projected near 2.0 times (x), with coverage of interest and preferred dividends in the 1.6x range. Coverage ratios are expected to trend upwards through ongoing leasing initiatives. Near-term funding requirements are likely to remain moderate and focused on incremental capex associated with redevelopment and leasing opportunities within the existing portfolio. Capex requirements are expected to be funded using a $30 million sub-facility (currently $18 million outstanding) of the company's new $155 million secured bank credit facility ($105 million outstanding). Fitch anticipates that Kramont will rely primarily on asset sale proceeds to fund new property investments, with dispositions to include outlying and repositioned assets. Near term debt refinancing requirements remain moderate, with both the bank credit facility and $181 million in mortgages maturing in 2003, and no other debt maturity through 2006.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.