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Brookfield Property Partners' credit rating has been cut to BB from BBB- by S&P Global Ratings, putting it in junk territory. It has also received a negative outlook.
The company is facing upcoming debt maturities, with about $2.3B due by 2025, Bloomberg reports, citing S&P, and there is a 1 in 3 chance of a further downgrade over next 12 months if Brookfield Property is unable to refinance its maturing debt or there is further softening in office occupancy.
The downgrade doesn't apply to parent company Brookfield Corp., which retains its investment-grade rating of BBB.
“We expect sector headwinds facing commercial office real estate will generally remain in place over the next several years, with weaker tenant retention, lower occupancy, and heightened incentives (through tenant inducements) to attract new tenants,” S&P analyst Michael Souers wrote, as reported by Bloomberg.
“This rating relates to a specific entity within Brookfield’s real estate business and has no impact on either the pricing or ability of Brookfield to access the real estate capital markets,” a Brookfield spokesperson told Bisnow by email. “Our real estate assets are primarily financed in the mortgage markets where we have executed some $30B of mortgages across 150 individual transactions globally over the last 12 months.
“Specifically on [Brookfield Property REIT], Brookfield’s retail real estate subsidiary, the report makes reference to retail assets having 'recovered to pre-pandemic levels.' In fact, the performance is well in excess of 2019 levels, the balance sheet was substantially deleveraged in 2021 and the prospects for these assets has never been more compelling.”
More than two years ago, S&P cut Brookfield Property’s credit rating to BBB-. Although classified as junk, a rating of BB is relatively strong, since it is less vulnerable to nonpayment than other speculative issues, according to S&P.
Still, debt with a BB rating “faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions that could lead to the obligor's inadequate capacity to meet its financial commitments on the obligation,” according to S&P. Brookfield Property has about $130B in assets.
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