This document provides a rating analysis and outlook for Investa Commercial Property Fund (ICPF). Some key points: - ICPF has a high-quality portfolio of office assets in Australia, particularly in Sydney and Melbourne, giving it a strong business risk profile. However, it faces risks from cyclical office markets and tenant demand. - The fund has a modest financial risk profile due to moderate leverage that is currently below target ranges. Leverage is expected to temporarily increase following an acquisition but remain within targets. - The rating has a stable outlook based on expectations that experienced management will maintain conservative policies and credit metrics. Leverage increases from acquisitions are incorporated into forecasts. - Downgrades could

1. Summary:
Investa Commercial Property Fund
Primary Credit Analyst:
Craig W Parker, Melbourne (61) 3-9631-2073; craig.parker@standardandpoors.com
Secondary Contact:
Karan Rathod, Melbourne +613 9631 2011; karan.rathod@standardandpoors.com
Table Of Contents
Rationale
Outlook
Standard & Poor's Base-Case Scenario
Business Risk
Financial Risk
Liquidity
Other Credit Considerations
Ratings Score Snapshot
Related Criteria And Research
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2. Summary:
Investa Commercial Property Fund
Business Risk: STRONG
Vulnerable Excellent
Financial Risk: MODEST
Highly leveraged Minimal
a
a- a-
Anchor Modifiers Group/Gov't
CORPORATE CREDIT RATING
A-/Stable/--
Rationale
Business Risk: Strong Financial Risk: Modest
• High-quality office portfolio
• Exposure to cyclical office property market and
variable tenant demand
• Moderately high tenant and geographic
concentration
• Short-dated debt-maturity profile
• Leverage currently below its target gearing range of
15%–30%
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3. Outlook: Stable
The stable outlook reflects our view that Investa Commercial Property Fund's (ICPF) high-quality asset base,
experienced management team, and conservative operating strategy should mitigate the risks associated with the
fund's exposure to cyclical office property markets. In the short term, we believe the fund will successfully manage
the refurbishment of its portfolio while maintaining adequate liquidity. We expect the fund to maintain gearing
(debt-to-total assets) within its targeted range of 15%-25% over the medium term and at a maximum gearing level
of 30% for strategic opportunities. We also expect that the potential acquisition of Investa Office Management
(IOM) can be accommodated within our forecasts for its credit metrics.
Downside scenario
Downward rating movement could occur if ICPF were to undertake large debt-funded acquisitions, asset
enhancement projects or construction developments that increased its gearing beyond our expectations. If this
were to occur, coverage measures would weaken, with funds from operations (FFO)-to-debt remaining less than
12% or EBITDA interest coverage at less than 3x. Downward rating pressure could also arise if the fund were to
change its operating strategy toward acquiring lower-grade office properties or adopted a more speculative
approach to its development program, including lower tenant pre-commitment thresholds or increased exposure to
construction and execution risk. A further sustained deterioration of the fund's occupancy level may also place
downward pressure on the rating.
Upside scenario
In our opinion, there is limited upward pressure given our view of the inherently cyclical nature of the office
property market. Nevertheless, upward movement could occur if the fund materially diversified its asset base and
adopted more-conservative financial policies.
Standard & Poor's Base-Case Scenario
We expect ICPF's FFO and earnings to modestly grow over the next two-to-three years. Driving this would be steady
rental growth from the fund's established portfolio and realization of earnings attributed to the potential acquisition of
420 George St, Sydney and completed 567 Collins St, Melbourne. Leverage will temporarily increase as a result of the
potential acquisition of 420 George St; however, it would be within our expectations.
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Summary: Investa Commercial Property Fund

4. Assumptions Key Metrics
• Distributions of 100% of operating income;
• Participation rate of about 55% for its distribution
reinvestment arrangement;
• Potential acquisition of 420 George St, Sydney for
A$295 million; and
• Completion of the development of 567 Collins St,
Melbourne in the year ended Dec. 31, 2015.
Year end June 30 2015A 2016F 2017F
EBITDA interest coverage 5.2x 3.5x-5.5x 3.5x-5.5x
Debt-to-EBITDA 2.0x 3.5x-4.5x 2.5x-3.5x
FFO-to-debt 42.7% 15%-25% 15%-25%
A--Actual. F--Forecast. FFO—Funds from operations.
Business Risk: Strong
ICPF has a sizable portfolio of high-quality office assets valued at A$3.2 billion at Dec. 31, 2015. Their assets are
diversified across Australia, with a significant exposure (47.6%) to Sydney's central business district (CBD). Offsetting
this concentration is our view that Sydney's office market is the strongest performing in the country with a deep tenant
base. Also performing well is the Melbourne CBD market, which comprises 26.6% of ICPF's total portfolio. We expect
the exposure to the Sydney market to increase with the potential acquisition of 420 George St building, which is
consistent with the fund's strategy of enhancing its asset quality. In addition, the proportion of high-quality assets
increased following the practical completion of a new office tower at 567 Collins St Melbourne. We also note the fund's
exposure to Perth through its holding in the QV1 building. This office market is more volatile than Sydney or
Melbourne given its exposure to the Australian mining sector, which is currently bearing the brunt of a cyclical
downturn. However, we note that the QV1 asset has a long weighted-average lease expiry (WALE), which will help to
offset income volatility for the maturing leases at this building.
Portfolio occupancy (by income) has noticeably increased to 94.3% at Dec. 31, 2015 (90.8% at Jan. 31, 2015), due to
the success of the fund manager in leasing more space at 120 Collins St, Melbourne, which experienced vacancy levels
of up to 27% in 2014. In addition ICPF has improved its WALE to 5.1 years at Dec. 31, 2015 (4.6 years at Jan. 31,
2015). The counterparty exposure is sound with long-term lease contracts to solid tenants, coupled with a high
proportion of fixed rent reviews that underpin ICPF's cash flow. However, while some tenant and geographic
concentration weighs down ICPF's credit quality, we believe that this does not detract from the solid business.
ICPF's operating strategy is to manage offices located in Australian CBDs. This means that it will eventually sell down
its ownership of Kings Row in 2016, which is not in a CBD location. We also expect the fund to undertake modest
levels of refurbishment and development of its high-quality asset base, which is integral to attracting and retaining a
wide array of tenants. ICPF is currently externally managed by Investa Office Management (IOM), benefiting from
IOM's property management expertise and market research. We note that ICPF has proposed to internalize
management of the fund by purchasing the management rights to IOM from the current owner, Morgan Stanley.
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5. Financial Risk: Modest
ICPF's financial risk profile continues to reflect its moderate financial policies that include a target gearing range of
15%-25% (debt to total assets) with a maximum of 30% for strategic opportunities. Gearing was a very conservative
10.8% at Dec. 31, 2015, from 17.6% at Jan. 31, 2015. The decrease was partly attributable to a A$580 million equity
raising in fiscal 2015. This low gearing is temporary, as we expect it to increase following the potential acquisition of
420 George St, Sydney. However, we expect it will remain within the fund's financial policy targets.
Reducing capitalization rates and increased asset values are driving the buoyant office markets in Australia, which has
also been supported by strong investor demand for high-quality assets. As a consequence, we are mindful that absolute
measures of ICPF's gearing range needs to benchmarked against leverage measures. We expect that at the manager's
peak gearing, the ratio of FFO to debt will remain greater than 12%.
The fund continues to use its distribution reinvestment arrangement (DRA) to retain funds, which generated a
participation rate of 64.8% in fiscal 2016, and 66% in the December 2015 quarter. We consider that continued investor
take-up under the fund's DRA and the fund's preparedness to raise new equity when required will maintain ICPF's
sound balance-sheet position.
ICPF has a short weighted-average debt maturity of around two years. Its debt funding consists of A$200 million of
committed bank facilities (undrawn at June 30, 2015), which matures toward the end of calendar 2016; a A$250 million
medium-term note (MTN) issue due in June 2016 and A$30 million due in June 2022. The secured MTN creditors
benefit from overcollateralization by more than 2x, which based on our recovery analysis, warrants the secured debt to
be given one-notch benefit to 'A'. We are mindful of the upcoming maturity of the A$25 million MTN issue as well as
the fund's undrawn bank facility. We expect that ICPF will manage this refinancing risk well before the scheduled
maturities.
ICPF's acquisition of Investa Office Management (IOM)
ICPF recently announced its intention to acquire IOM, which is currently owned by Morgan Stanley Real Estate
Investing (MSREI). Under this proposed structure, ICPF will own the management rights to its own portfolio, as well as
Investa Office Fund (IOF). Should the transaction successfully proceed, we do not expect any adverse impact on the
rating on ICPF. In addition to a reduction in management fees (that are currently paid to IOM), the fund will continue
to prudently grow the asset base consistent with its financial policies.
We have not factored this transaction into our base-case projections.
Liquidity: Adequate
We consider ICPF to have adequate liquidity. We expect its sources-to-uses to be greater than 1.2x in the next 12
months. We consider the distribution reinvestment arrangement, successful refinance of maturing debt, and potential
for moderate asset sales will support ICPF's liquidity position.
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Summary: Investa Commercial Property Fund

6. Principal Liquidity Sources Principal Liquidity Uses
• FFO of about A$150 million; and
• Undrawn facilities of A$200 million.
• Capital expenditure requirement of about A$100
million over the next year.
• Distributions of about A$50 million (net of DRA);
and
• Successful acquisition of 420 George St, Sydney.
Other Credit Considerations
As the fund has the ability to increase its gearing to the maximum level of 30%, we have applied a negative financial
policy modifier that lowers the anchor by two notches. At higher gearing levels, the financial risk profile would
deteriorate to an intermediate level. However, it is unlikely that a change in gearing within the fund's financial policy
range would prompt a rating action: the lower anchor score would be offset by removing the two-notch financial policy
modifier.
When the fund is operating at its peak gearing level, we would also apply a positive comparable rating analysis
modifier, which provides one-notch uplift. We expect that at the top of its target gearing range, the fund will exhibit
credit metrics that are consistent with the top half of the intermediate financial risk descriptor. These stronger credit
metrics are supportive of the one-notch uplift and consistent with other real estate peers.
Ratings Score Snapshot
Corporate Credit Rating
A-/Stable/--
Business risk: Strong
• Country risk: Very low
• Industry risk: Low
• Competitive position: Strong
Financial risk: Modest
• Cash flow/Leverage: Modest
Anchor: a
Modifiers
• Diversification/Portfolio effect: Neutral (no impact)
• Capital structure: Neutral (no impact)
• Financial policy: Negative (-2 notches)
• Liquidity: Adequate (no impact)
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7. • Management and governance: Satisfactory (no impact)
• Comparable rating analysis: Positive (+1 notch)
Related Criteria And Research
Related Criteria
• Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014
• General Criteria: Group Rating Methodology, Nov. 19, 2013
• General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013
• Key Credit Factors For The Real Estate Industry, Nov. 19, 2013
• Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013
• General Criteria: Methodology: Industry Risk, Nov. 19, 2013
• Corporate Methodology, Nov. 19, 2013
• Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012
• 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard &
Poor's 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).
Business And Financial Risk Matrix
Business Risk Profile
Financial Risk Profile
Minimal Modest Intermediate Significant Aggressive Highly leveraged
Excellent aaa/aa+ aa a+/a a- bbb bbb-/bb+
Strong aa/aa- a+/a a-/bbb+ bbb bb+ bb
Satisfactory a/a- bbb+ bbb/bbb- bbb-/bb+ bb b+
Fair bbb/bbb- bbb- bb+ bb bb- b
Weak bb+ bb+ bb bb- b+ b/b-
Vulnerable bb- bb- bb-/b+ b+ b b-
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