S&P Slashes Brookfield Property Partners’ Credit Rating

S&P Global Ratings followed through on its consideration, downgrading Brookfield Property Partners’ credit rating to junk status.

S&P took the Brookfield entity’s credit score down by two steps, according to a statement reported by Bloomberg, from BBB- to BB. The cut to the lowest investment grade suggests Brookfield Property “faces major ongoing uncertainties to adverse business, financial and economic conditions.”

S&P has been eyeing a downgrade for Brookfield’s primary real estate arm in recent weeks, citing trouble with the Canadian conglomerate entity’s ability to refinance maturing debt in the coming years. Approximately $2.3 billion in debt is set to mature by 2025; S&P said its view of liquidity could be impacted if Brookfield Property doesn’t get out ahead of these maturities.

There’s a chance S&P knocks down Brookfield Property again in the next year if it fails to refinance some of its debt or office occupancy drops further.

In the last year, Brookfield defaulted on more than $1 billion borrowed against Downtown Los Angeles office buildings, saddled with higher interest rates and a changing office landscape. Brookfield also stopped making payments on $886 million in loans tied to 10 retail properties.

Brookfield may have a better shot at refinancing properties in 2024 if the Federal Reserve enacts interest rate cuts, but the maturity wall is closing in on the property unit. Brookfield Property may also be helped by its affiliation with its parent company, according to S&P, which has an investment grade rating viewed favorably by lenders.

S&P’s decision “has no impact on either the pricing or ability of Brookfield to access the real estate capital markets,” a spokesperson for Brookfield said in a statement, adding that the prospects for the retail assets referenced in S&P’s move have “never been more compelling.”

Brookfield took Brookfield Property private in 2021. The property unit owns approximately $130 billion in assets.

— Holden Walter-Warner