(The following was released by the rating agency)
MELBOURNE (Standard & Poor‘s) Dec. 10, 2012--Standard & Poor’s Ratings Services said today that its ratings on GPT Group (A-/Stable/A-2) are not immediately affected by GPT’s announcement of an indicative and non-binding proposal to acquire Australand Property Group’s (Australand; not rated) investment property portfolio.
GPT has indicated that the proposed acquisition, if it proceeds, will be cash funded and will exclude Australand’s residential operations. In our view, this proposal is consistent with GPT management’s intention to reweight its asset portfolio to office and industrial assets. If this transaction were to proceed, GPT’s exposure to retail assets is expected to reduce from its current level of 58% toward its target of 50%. GPT has articulated a target of weighting its office assets to 35% from 30%, and logistics and business parks to 15% from 9%.
Although we expect GPT to fund this potential acquisition in a manner consistent with the rating, we will continue to review the group’s funding structure, future growth strategy, and capital management plans as the transaction progresses. To maintain the ‘A-’ rating, GPT is expected to maintain funds from operations (FFO)-to-debt at more than 10%, EBITDA interest cover above 2.5x, and statutory debt-to-assets at less than 35% over the short term. Our adjusted financial metrics take into account the proportional consolidation of GPT’s interest in its joint ventures and associates, and we treat the GIC exchangeable securities as a debt-like instrument.