GPT Wholesale Shopping Centre Fund

The negative outlook on GWSCF reflects our view that earnings will come under pressure over the next 12 months due to business disruption stemming from the COVID-19 pandemic. Our base case assumes the fund can absorb current earnings headwinds and maintain a high level of occupancy in its shopping centers, which would support an earnings recovery in the year ending June 30, 2021. We could lower the rating by one notch if rent deferrals depressed earnings such that the funds from operations (FFO)-to-debt weakened to sustainably below 12%. This scenario could arise due to sustained reduction in earnings because of a combination of lower portfolio occupancy, rental abatements, or negative rental reversions. Further rating pressure could arise from significant debt-funded

...In our view, GPT Wholesale Shopping Centre Fund's (GWSCF) earnings are likely to be pressured across calendar year 2020 due to business disruption stemming from the COVID-19 pandemic. We expect GWSCF's earnings to decline in the short term due to a combination of factors including: rent deferrals, rental waivers, lower renewal rates on current leases, and higher vacancies when the Australian economy emerges from recessionary conditions. We believe GWSCF's earnings for the year ended June 30, 2020, will be adversely affected as a result of these headwinds. However, our base case assumes the fund can absorb current weakened economic conditions and maintain a high level of occupancy in its shopping centers, supporting an earnings recovery in fiscal years 2021 and 2022. In our view, the fund has some buffer in its credit metrics over the next 12 to 18 months to absorb the loss of, and ongoing disruption to, forecast rental income. We believe the fund manager's actions will help cushion the...

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