Moody’s downgrades Growthpoint and Redefine after cutting South Africa outlook
Moody’s Investors Service has downgraded ratings at Growthpoint Properties and Redefine Properties to negative, after lowering its outlook for the South African government’s credit rating.
Moody’s said the negative outlook on these was a direct consequence of the sovereign outlook change from stable to negative. It affirmed the long-term Baa3 issuer ratings.
It stated: “The weakening macroeconomic environment has translated into depressed consumer and business confidence which flows through to lower growth prospects for these corporates, given their material exposure to the domestic operating environment.
Moody’s Investors Service has downgraded ratings at Growthpoint Properties and Redefine Properties to negative, after lowering its outlook for the South African government’s credit rating.
Moody’s said the negative outlook on these was a direct consequence of the sovereign outlook change from stable to negative. It affirmed the long-term Baa3 issuer ratings.
It stated: “The weakening macroeconomic environment has translated into depressed consumer and business confidence which flows through to lower growth prospects for these corporates, given their material exposure to the domestic operating environment.
“The rating agency expects GDP growth of only 0.7% in 2019 and 1% in 2020.”
Growthpoint, which is South Africa’s largest REIT by gross assets, recently agreed to buy a 30.3% controlling stake in Capital & Regional.
The ratings agency said that Growthpoint’s international exposure and “currently good” credit metrics reduced the degree of rating linkage to the government’s rating, but considered it insufficient to warrant a “delinking” between the two.
For Redefine, the negative outlook largely reflected its operational concentration domestically, with 73% of distributable income and 76% of property value derived from South Africa as at 31 August.
“Whilst Redefine benefits from some diversification into Poland (A2 stable) and property investments in the United Kingdom and Australia, at this point, this is not sufficient to delink Redefine Properties Limited’s ratings from the sovereign rating,” stated Moody’s.
“In addition, the ratio of debt to total assets remains weak for the current rating.”
Moody’s said that upgrades for either REIT were “unlikely in the near term”, unless the government’s rating changes back to “stable”.
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