articles Ratings /ratings/en/research/articles/210604-research-update-amp-capital-wholesale-office-fund-outlook-revised-to-negative-on-higher-expected-leverage-a-11988920 content esgSubNav
In This List

Research Update: AMP Capital Wholesale Office Fund Outlook Revised To Negative On Higher Expected Leverage; 'A-' Rating Affirmed

Root and Branch - July 2021: ELFA Survey, Greenium and KPIs


COVID-19 Impact: Key Takeaways From Our Articles


Bulletin: Neoenergia S.A.'s Mid-Year Results On Track To Meet Expectations Despite Higher Energy Costs


U.S. Satellite Providers Diverge In The Struggle To Stem A Shrinking Market: An In-Depth Peer Comparison Of DISH DBS Corp. And DirecTV Entertainment Holdings LLC

Research Update: AMP Capital Wholesale Office Fund Outlook Revised To Negative On Higher Expected Leverage; 'A-' Rating Affirmed

Rating Action Overview

  • We believe the proposed sale of AMP Capital Wholesale Office Fund's (AWOF) share in 200 George Street, to satisfy equity redemptions due in fiscal 2022, will reduce attributable income for the Australia-based REIT without a corresponding offset in debt.
  • At the same time, elevated capex over the next fiscal year as Quay Quarter Tower comes to completion will contribute to weakened credit metrics, in our view.
  • We therefore revised our outlook on AWOF to negative from stable. At the same time, we affirmed our 'A-' issuer credit rating on the fund.
  • We could lower our ratings on AWOF if we expect FFO to debt to remain below 12% after fiscal 2022. This could occur if the fund increases capex or makes further equity redemptions, which could constrain its deleveraging path.

Rating Action Rationale

We expect AWOF's weakened leverage metrics to remain under pressure over the next 18 months.  The fund's S&P Global Ratings-adjusted ratio of funds from operations (FFO) to debt decreased below 12% in fiscal 2020 (ended Dec. 31, 2020), down from approximately 20% in fiscal 2019. We expect this metric to remain at similar levels through to the start of fiscal 2023. Elevated capital expenditure (capex) over the next year in tandem with equity redemption requests, particularly in 2022, have diminished the rating headroom. Furthermore, the sale of 200 George Street, Sydney, will reduce income without any offsetting reduction in debt.

Nevertheless, we expect AWOF's Sydney developments at Quay Quarter Tower (QQT) and Brookfield Place, which are both more than 80% precommitted, to buttress rental income following their completion. We expect healthy rental income from the Brookfield Place development to commence in late fiscal 2021, with QQT expected from early fiscal 2022.

AWOF's gearing will increase but remain within its target range of 15% to 25%.  The fund's gearing ratio (company's measure--total liabilities to total tangible assets) increased to 22.0% in March 2021 from 16.2% in March 2020, driven by a ramp up in capex as well as equity redemptions. Borrowings will increase as developments progress, yet we anticipate the fund's gearing will stay within its 15%-25% target range, albeit at the higher end.

We expect any near-term future developments opportunities to be funded prudently. While not in our base case, we acknowledge that the fund is planning to redevelop 33 Alfred Street, Sydney. We understand that AWOF has received development application approval from Sydney council, which includes internal and external refurbishments. AMP, which is currently the sole tenant of the asset, will be vacating to relocate to QQT once that asset is completed. Plans for 33 Alfred Street remain uncertain given the change in responsible entity manager for the joint owner in the asset. In addition, we note that the development at AWOF's partly owned Cockle Bay asset is being considered. A Stage 2 development application is slated for later in 2021 and a tenant precommitment would likely be required to underpin this project's feasibility.


The negative outlook reflects our view that leverage is likely to remain elevated over the next 12-18 months following a peak in capex coupled with higher-than-expected equity redemptions. During this period, a large proportion of the asset base is transitioning from a development phase to income stabilization. In addition, the forecasted loss of income from the sale of 200 George Street, to satisfy upcoming equity redemption payouts, will erode credit metric headroom in the rating.

We project adjusted FFO to debt to remain below 12% in 2021 and 2022. Nevertheless, we expect AWOF to successfully complete its upcoming developments, which are more than 80% precommitted and maintain a high level of occupancy across the property portfolio.

Downside scenario

We could lower the rating in the next one to two years if higher levels of development capex, additional equity redemptions, or weaker occupancy and rental income results in FFO to debt remaining below 12% beyond the next 18 months. We could also lower the rating if significant further asset sales materially reduce the fund's size and diversity, without an offsetting reduction in financial risk.

Upside scenario

We could revise the outlook to stable if:

  • We expect the fund to sustain FFO to debt above 12%;
  • Operating performance is in line with our expectations, with no material effect from tenants downsizing their office footprints due to changes in working-from-home habits; and
  • The fund maintains adequate liquidity.

Company Description

AWOF is an unlisted Australian REIT with a total portfolio value of A$7.4 billion (includes 200 George Street) as of March 31, 2021. The fund invests in office properties and owns 12 assets in Australian CBD markets.

Our Base-Case Scenario

  • Australian real GDP growth rate of 4.0% in 2021 and 3.3% in 2022;
  • Consumer price inflation of 1.6% in 2021 and 1.8% in 2022;
  • Capex over the next 12 months of around A$340 million;
  • Assumed divestment proceeds of 200 George Street, Sydney, and Loftus Lane Apartments, Sydney, totaling A$780 million in 2021;
  • Acquisition of increased stake in Brookfield Place of approximately A$290 million in 2021;
  • Higher-than-expected equity redemptions over the next two fiscal years;
  • Distributions in line with previous years; and
  • Active distribution reinvestment program in line with current participation rates.
Key metrics
  • S&P Global Ratings' adjusted FFO to debt of about 11.0% to 11.5% in fiscal 2021, remaining under 12% in fiscal 2022; and
  • Debt to EBITDA of mid-7x in both fiscal 2021 and fiscal 2022.


AWOF's satisfactory liquidity reflects our expectation that the fund's liquidity sources would cover its uses by 1.2x over the next 12 months. We expect its net sources and uses of liquidity to remain positive even if EBITDA were to decline by 10%. In addition, we expect AWOF to remain compliant with its financial covenants.

In our opinion, AWOF has sound relationships with banks. The fund also has a track record of accessing equity from its institutional equity providers to support its funding requirements.

As of March 31, 2021, the fund had the following liquidity profile:


  • FFO of about A$175 million to A$185 million over the next 12 months;
  • Cash on hand of about A$33 million;
  • Asset sales of around A$780 million;
  • Active distribution reinvestment plan in line with current participation rates; and
  • About A$445 million of committed undrawn bank facilities maturing beyond 12 months.


  • No upcoming debt maturities in the next 12 months;
  • Capex of about A$320 million to A$340 million;
  • Acquisition costs of about A$340 million;
  • Equity redemption payout; and
  • Distribution payout consistent with previous reporting periods.

Ratings Score Snapshot

Issuer Credit Rating: A-/Negative/--

Business risk: Strong

  • Country risk: Very Low
  • Industry risk: Low
  • Competitive position: Strong

Financial risk: Intermediate

  • Cash flow/Leverage: Intermediate

Anchor: bbb+


  • Diversification/Portfolio effect: Neutral (no impact)
  • Capital structure: Neutral (no impact)
  • Financial policy: Neutral (no impact)
  • Liquidity: Adequate (no impact)
  • Management and governance: Fair (no impact)
  • Comparable rating analysis: Positive (1+ notch)

Related Criteria

Ratings List

Ratings Affirmed

AMP Capital Wholesale Office Fund

Senior Unsecured A-
Ratings Affirmed; CreditWatch/Outlook Action
To From

AMP Capital Wholesale Office Fund

Issuer Credit Rating A-/Negative/-- A-/Stable/--

S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at for further information. Complete ratings information is available to subscribers of RatingsDirect at All ratings affected by this rating action can be found on S&P Global Ratings' public website at Use the Ratings search box located in the left column.

Primary Credit Analyst:Rhys Corry, Melbourne + 61 3 9631 2109;
Secondary Contact:Craig W Parker, Melbourne + 61 3 9631 2073;

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to:

Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back