Research Update: Charter Hall Prime Office Fund Downgraded To 'BBB-' On Sustained Weaker Credit Metrics; Outlook Stable

Charter Hall Prime Office Fund's (CPOF) credit metrics will remain subpar for a 'BBB' rating, at least over the next 24 months, in our view. The Australia-based wholesale office fund faces rising interest costs, elevated debt levels and declining asset valuations at a time of structural and cyclical weakness in demand for office space. A higher-for-longer interest rate outlook and anemic transaction market will challenge the timeliness of capital raising and efficacy of planned asset divestments. As a result, we expect CPOF's ratio of funds from operations (FFO) to debt will remain below 7% over the next two years. We therefore lowered to 'BBB-' from 'BBB' our long-term issuer credit rating on CPOF and the long-term issue ratings on the

...- Charter Hall Prime Office Fund's (CPOF) credit metrics will remain subpar for a '###' rating, at least over the next 24 months, in our view. The Australia-based wholesale office fund faces rising interest costs, elevated debt levels and declining asset valuations at a time of structural and cyclical weakness in demand for office space. - A higher-for-longer interest rate outlook and anemic transaction market will challenge the timeliness of capital raising and efficacy of planned asset divestments. As a result, we expect CPOF's ratio of funds from operations (FFO) to debt will remain below 7% over the next two years. - We therefore lowered to '###-' from '###' our long-term issuer credit rating on CPOF and the long-term issue ratings on the notes the fund guarantees. - The stable outlook reflects our expectation that CPOF will proactively pursue capital management initiatives to protect its credit metrics while executing its operating strategy. We expect the fund to maintain adequate...

Research Update