OREANDA-NEWS. S&P Global Ratings affirmed its 'BBB-' corporate credit rating on Memphis, Tenn.-based Education Realty Trust Inc. and its operating partnership Education Realty Operating Partnership LP (collectively, EDR). The outlook is stable. At the same time, we affirmed our 'BBB-' issue-level rating on EDR's senior unsecured notes.

"Our business risk profile assessment incorporates EDR's above-average asset quality and its increasing competitive advantage of attaining public-private partnerships (PPPs) with universities," said credit analyst Sarah Sherman. "These factors are partially offset by EDR's large development pipeline and relatively small size compared with rated peers."

We believe EDR's stabilized communities will deliver modest growth, supported by favorable near-term fundamentals, and will be supplemented by the delivery of new development projects currently in process. In addition, we expect the company will sustain debt to EBITDA below 6x over the next two years while the company continues to transition a more conservative balance sheet by relying less on its revolver and variable rate financing.

We would consider raising the rating if EDR increases its scale meaningfully on a leverage-neutral basis, while prudently pursuing development and managing appropriate liquidity to finance projects. EDR would also need to sustain current positive operating and leasing momentum and become less reliant on its revolving credit facility. We could also raise the rating if the company operated on a sustained basis with debt to EBITDA below 4.5x.

While also unlikely over the next 24 months, we would consider lowering the rating if FCC falls below 2.5x or debt to EBITDA rises above 7x, potentially driven by leverage growth or a failure to lease up the portfolio ahead of the academic year. We would also consider lowering the rating if the company significantly increases its development pipeline without match funding with equity issuance or if it encounters meaningful operational stumbles.