This article is from the Australian Property Journal archive
RATINGS agency Standard & Poor’s Ratings Services has maintained its A-/A-2 ratings and stable outlook for the Commonwealth Property Office Fund despite the fund spending $300 million on two purchases.
At the same time, S&P has also assigned A- long-term credit rating to CPA’s proposed $200 million seven-year convertible note issue.
Earlier this week, CPA bought two properties at 145 Ann St Brisbane Queensland, and a 50% interest in 58 Mounts Bay Rd Perth, Western Australia. CPA indicated that it plans to progressively spend about $310 million on these two projects over the next two-to-three years.
“Although there are no rating implications from these announcements, we consider that the increased development exposure and additional financial risk will potentially limit CPA’s capacity to undertake further sizeable debt-funded acquisitions or internal development projects at the ‘A-‘ rating level,” S&P credit analyst Brenda Wardlaw said.
“However, we anticipate that CPA will maintain an active approach to capital management to support its ‘A-‘ credit profile in the medium-to-long term. Following the acquisition, CPA’s financial profile is expected to remain consistent with the ‘A-‘ rating, including EBITDA interest cover of about 3x or more, and funds from operations to debt above 12%.
“Although CPA’s target gearing range (debt to total assets) is a maximum of 40%, the ‘A-‘ rating anticipates that the fund’s gearing will not exceed the low-30% level,” Wardlaw added.
Australian Property Journal
