Goodman Australia Industrial Partnership

The positive outlook reflects the potential for an upgrade to 'A-' in the next 12-24 months if GAIP can continue to successfully execute on its growth strategy while delivering the expected improvement in key credit measures. In the short term, we expect GAIP to maintain its FFO to debt above 9%, and adjusted debt to EBITDA below 7.5x, in line with expectations for the 'BBB+' rating. We also anticipate GAIP will manage capital allocations when required to fund potential long-dated future performance fee payments. We could revise the outlook to stable if, over the next 12-24 months, the expected improvement in credit metrics does not occur, such that we expect that GAIP to sustain FFO to debt below 12%, or

... enlarged scale and improved market position enhance its competitive position. GAIP has amassed a sizable portfolio of industrial assets that generate stable rental income and are spread across Australia's east coast. This strategy has strengthened GAIP's competitive advantage, with the REIT owning well-located assets in attractive leasing markets. In particular, GAIP's Sydney-based assets benefit from higher barriers to entry than in other east coast locations. The partnership's A$1.0 billion equity raising reflects GAIP's commitment to prudent funding of its growth. The equity raising should lower the REIT's gearing (net debt to net assets) toward the low-20% level over the next 18 months, from about 27% as of Sept. 30, 2020. This level is materially below GAIP's stated target gearing range of 25%-35%. Management's decision to position its gearing at this level is based on an expectation of continued low capitalization rates that are bolstering...

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