Goodman Australia Industrial Partnership

The stable outlook reflects our expectation that GAIP would prudently manage the timing and execution of its asset sales or equity issuance to fund its committed development pipeline. As a result, we expect GAIP to maintain its funds from operations (FFO) to debt consistently above 12% at the top of its leverage range. We also expect GAIP to manage its capital management plan appropriately when it allocates funding for potential future performance fees. Downward rating pressure could occur if GAIP adopted a more-aggressive growth strategy, or increased speculative development as a proportion of its development book. Downward momentum could also occur if GAIP entered into asset types or geographic markets outside of its core business areas, worsening the partnership's business

... A$7.5 billion diversified portfolio as of Sept. 30, 2019, comprises good-quality industrial and business park assets that underpin its credit quality. GAIP is Australia's largest owner of industrial property and business space. Its portfolio comprises 99 assets ranging from warehouse/distribution centers, industrial estates, business parks, and office parks. Gearing is strategically lower than GAIP's target range of 30% to 40% in light of inflated asset values. Management's intention is to maintain gearing at around 25% during this point in the cycle. We expect the activated distribution reinvestment plan, which had a 53.4% take-up rate in the September 2019 quarter, together with GAIP's asset recycling, to be supportive of this gearing target. Our base case forecasts gearing to be about 26% and includes the partnership's likely upcoming performance fee payment. In our view, GAIP's financial leverage could materially increase toward the...

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