This article is from the Australian Property Journal archive
S&P Global Ratings has downgraded its rating of GPT Wholesale Shopping Centre Fund as the fund remains heavily exposed to Highpoint shopping centre in Melbourne.
In a note explaining its rerating of the fund from A- to BBB+, The agency said the Australian retail environment has become more challenging since GWSCF increased its share in Highpoint in September of 2017.
“It has become increasingly difficult for GWSCF to identify and execute on appropriate substitute assets despite the manager’s desire to undertake an asset swap.
“We now believe that implementing this asset-swap strategy will be protracted and beyond the tolerances for the ‘A-‘ rating. This is given the current retail and economic headwinds in Australia, as well as the tightly held and limited trading of high-quality retail assets in the country,” S&P Global Ratings said.
“We lowered the ratings on GWSCF to reflect the fund’s continued concentration risk to one sizable but high quality asset,” it said, adding that it views the Highpoint exposure “in and of itself, to be a relative strength to GWSCF’s portfolio”.
Funds from operations to debt is forecast to be between 14% and 14.5% across the 2020, and 2021 financial years.
“This is below our expectations for the ‘A-‘ rating during a period of heightened asset concentration, and consequently, we expect GWSCF to operate with credit metrics that are consistent with an intermediate financial risk profile over the next two years.”
The unlisted fund’s exposure to the mall is 46% of its total fund value. It has been refocusing its portfolio towards regional and super-regional centres, offloading Norton Plaza neighbourhood shopping centre in Sydney’s inner west for $153.2 million last year. Late in 2018 it sold off the Highpoint Homemaker centre, next to Highpoint Shopping Centre, for $80.5 million.