Australian Prime Property Fund Retail

The fund's gearing cannot go above 25% without the approval of the trustee and investor review board. However, in March 2020 APPF Retail approved a temporary increase of the 25% gearing cap up to the bank gearing limit of 35%. The fund's increased gearing cap would provide it with flexibility to help weather asset value decrements that are caused by potential rent relief and lower rents on lease renewals as a result of the COVID-19 pandemic. The negative outlook reflects our view that APPF Retail's financial headroom at the 'A-' rating is diminishing given a potential call on the fund to finance residual equity redemptions. The remaining equity redemption amounts of about A$1.4 billion (based on March 2020 NUV) could

...Australian Prime Property Fund Retail's (APPF Retail's) financial headroom at the 'A-' rating remains under pressure. We believe that the fund's financial headroom is under pressure due to the adverse effects of COVID-19, coupled with the fund's endeavors to satisfy equity redemptions. This will likely constrain the fund's ability to maintain an adjusted funds from operations (FFO)-to-debt ratio above 17% over the next 12-18 months. At present, the fund has a balance of potential shareholder redemptions of about A$1.42 billion based on the net unit value (NUV) as of March 31, 2020 (outstanding liquidity requests of 832,349 units). APPF Retail's portfolio of ten good-quality retail assets spread across Australia will continue to underpin its business position. In our view, the fund's portfolio is weighted toward assets in population growth corridors that will benefit from a sizable trade catchment area. The major and super regional Australian shopping centers represent 84% of the portfolio...

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