Global Credit Ratings has accorded the above credit rating(s) on Resilient Property Income Fund Limited based on the following key criteria:
The strategic positioning of the fund’s primarily dominant retail properties in non-metropolitan areas provides a strong competitive advantage, and has ensured well spread lease expiries as well as low vacancy rates. This is supportive of sound cash flows in spite of the challenging environment. Resilient’s developments and existing centres are also anchored by large national retailers, which account for over 65% of the fund’s gross rentals, lending further predictability to its income streams. On the back of the timely completion of sizeable developments and strategic acquisitions, Resilient has consistently achieved strong top line growth, registering robust yields and above- inflation rental escalations. Looking ahead, profitability is expected to remain robust, notwithstanding rising cost pressures and operational risk stemming from utility and municipal rate hikes.
The LTV equated to a relatively low 30% at FYE12, comfortably below management’s target of 35%-40%. While earnings-based gearing remains above GCR’s 400% benchmark for highly rated funds, a significant improvement resulted from Boardwalk’s initial contribution to income. A strong project pipeline for F13-F14 is expected to boost earnings, supporting lower ratios over the medium term. Debt serviceability metrics remain sound, and should be sustained above GCR’s benchmarks over the medium term. In addition, the fund evidences a favourable liquidity profile, with ample over-collateralisation on existing facilities, low encumbrances and access to capital markets. Debt maturities are relatively well spread over the medium term.
Upward pressure could be exerted on the ratings in the medium term if the fund’s ongoing projects are completed timeously, as this would serve to further enhance scale and ease earnings-based gearing. The gradual reduction of the development pipeline is also supportive of lower risk. However, unanticipated schedule and performance risks or subdued fair value gains could result in higher than projected gearing metrics, placing downward pressure on the rating.
NATIONAL SCALE RATINGS HISTORY
Initial rating (May/2010)
Long term: A-(ZA); Short term: A1-(ZA) Outlook: Stable
Last rating (May/2012)
Long term: A(ZA); Short term: A1(ZA) Outlook: Stable
+27 11 784 1771
Head of Sector: Corporates
+27 11 784 1771
The ratings above were solicited by, or on behalf of, the rated client, and therefore, GCR has been compensated for the provision of the ratings.
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SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument; and d.) the validity of the rating is for a maximum of 12 months, or as indicated by the applicable credit rating document.
Resilient Property Income Fund Limited participated in the rating process via face-to-face management meetings, teleconferences and other written correspondence. Furthermore, the quality of info received was considered adequate and has been independently verified were possible.
The credit rating(s) has been disclosed to Resilient Property Income Fund Limited with no contestation of the rating.
The information received from Resilient Property Income Fund Limited and other reliable third parties to accord the credit rating included the latest audited annual financial statements (plus four years of comparative numbers), latest internal and/or external report to management, full year detailed budgeted financial statements, most recent year to date management accounts, corporate governance and enterprise risk management frameworks, reserving methodologies, capital management policy, industry comparative data and regulatory framework and a breakdown of facilities available and related counterparties. In addition, information specific to the rated entity and/or industry was also received.