QIC Property Fund

The stable outlook reflects our view that QPF's conservative financial policies have positioned the fund to weather earnings 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 recessionary headwinds and maintain a high level of occupancy in its shopping centers. We expect QPF's adjusted FFO-to-debt ratio to remain well above 12%. Upward rating movement will depend on the fund sustaining adjusted FFO to debt above 15% at the top of the fund's gearing policy following the adverse and uncertain effects of COVID-19 have abated. We are also mindful that upward rating movement would depend on the fund successfully completing the 80 Collins, Melbourne, project in

...In our view, QIC Property Fund's (QPF) conservative financial policies have positioned the fund to weather earnings pressure over the next 12 months due to business disruption stemming from the COVID-19 pandemic. We expect retail landlords' earnings to decline in the short term due to a combination of factors including: rental deferrals, rental waivers, lower renewal rates on current leases, and higher vacancies when the Australian economy emerges from recessionary conditions. In our view, QPF has considerable buffer for the 'A' rating and ample sources of liquidity to absorb the loss of, and ongoing disruption to, forecast rental income. QPF's conservative financial policies and strengthened balance sheet as a result of recent noncore asset divestments are key differentiators compared with peers. The fund's divestments of 80 Collins, Victoria; Q&A Complex, Queensland; and Noosa Civic, Queensland for total sale proceeds of about A$2.0 billion (QPF's share) are consistent with the managers'...

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