S&P Raises Unibail's Rtgs to 'A/A-1'; Otlk Stable.

PARIS--(BUSINESS WIRE)--Standard & Poor's CreditWire 10/14/98--Standard & Poor's today raised its long-term rating on Unibail to single-'A' from single-'A'-minus and its short-term rating on the company to 'A-1' from 'A-2'. The outlook has been changed to stable from positive.

Unibail's ratings primarily reflect the company's strong position in the French property market and, in particular, in the large shopping mall segment, which Standard & Poor's views as a relatively strong section of the property market. Shopping malls generate steady and secure cash flows indexed to the general economy, and average yields of close to 8%. Unibail has key holdings in four of the eight biggest French malls. Unibail's ratings also reflect the company's successful approach to the prime office property sector in the Parisian Central Business District since 1996.

In 1991, Unibail decided to exit the real estate leasing sector and give up its status as a SICOMI (property leasing company) to concentrate on property investment, particularly investment in shopping malls, and thus widen its stable revenue base and increase yields. The high proportion of shopping centers in Unibail's property portfolio (45% of the total at year-end 1997) provides Unibail with a recurrent flow of rental income. Unibail's market position is strengthened by the increasing protection provided by more restrictive legislation on opening hypermarkets, introduced in 1996.

The company continues to divest noncore residential properties, and decided to return to the upscale office market in the Paris area in 1996, where average rents have started to rise again. Consequentely, Unibail's property portfolio is now equally dispatched between offices and shopping malls, with residual outstandings in the residential and industrial premises sectors.

The company's decision to stop real estate leasing and lending to real estate developers leaves it with a cleaner asset portfolio.

OUTLOOK: STABLE

The outlook reflects Unibail's well-advised strategy over the past five years as well as the improvement in its asset quality and profitability. In particular, the company has made significant progress in reducing the vacancy rate in its office portfolio. This rate is expected to improve further once the current refurbishment of major buildings is completed. Standard & Poor's also expects that Unibail, through further noncore asset sales, the amortization of its leasing portfolio, and the conversion of its convertible bond issue into equity, will be able to maintain adequate net interest coverage and reduce its gearing ratio.---CreditWire

RATINGS RAISED      TO        FROM
Counterparty ratings     A/Stable/A-1        A-/Positive/A-2
Senior unsecured         A         A-
CDs            A/A-1          A-/A-2