GPT Wholesale Shopping Centre Fund

The negative outlook reflects GWSCF's key risk comprising its large exposure to a single asset. However, we expect the fund's initiatives to moderate this exposure and reduce debt, which would support the 'A-' rating and partially offset the deterioration in its credit metrics. We would consider a downgrade if the fund is unable to demonstrate progress, over the short-term, toward diversifying its asset portfolio into assets that are consistent with its operating strategy. In addition, should the fund's credit metrics deteriorate sustainably below an FFO to debt of 15%, it could indicate that management lacks commitment to maintaining a more conservative financial risk profile during this period of heightened asset concentration. We would revise the outlook to stable if the

...Downward rating pressure remains on GPT Wholesale Shopping Centre Fund (GWSCF) due to the fund's single-asset, albeit we believe temporary, concentration risk. GWSCF's acquisition of an additional equity stake in Highpoint Shopping Centre, Melbourne, in September 2017 increased the fund's already large holding in the asset. The center represents about 45% by value of the fund's A$4.8 billion asset base as of March 31, 2019. However, we believe the manager's operating strategy is committed to reducing this exposure to Highpoint. In addition, the fund intends to divest noncore assets over the next 12 months, using the proceeds to reduce debt. Such an approach would demonstrate some balance-sheet conservatism, partially tempering the single-asset concentration risk. Still, the rating could come under pressure if we believe that the fund's execution on reducing the Highpoint exposure is wavering and that progress in diversifying its portfolio is unlikely. Highpoint Shopping Centre's strength...

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