FINANCIAL INFORMATION
Interest Cover Ratio (ICR) Interest Coverage Ratio (ICR) is the ability of the Trust to meet interest payments from earnings and is a key metric used by financiers. It is calculated by dividing the Net Operating Income before interest, by interest cost, and is a measure of the buffer against either interest expense increasing and/or income decreasing. The below interest rate table sensitises the base case interest rate by +/- 0.50%.
Interest Cost Quanta has credit endorsed terms with the current indicative pricing for the Debt Facility being a margin of 1.61% over the 90-day bank bill rate, which is approximately 4.46%. This currently reflects an all-up interest rate of 6.07%. Prior to the release of the June 2024 inflation figures, there was some uncertainty in the market as to whether the RBA would increase the cash rate in the August meeting. With the trimmed mean inflation being reported below the RBA’s expectations, and in line with market expectations, the RBA held the target cash rate at 4.35%. Economists and markets are predicting the next movement of cash rate to be a reduction, sometime between November 2024 and June 2025. Our adopted Year 1 interest rate of 5.95% takes into consideration the forecasted reduction in interest/cash rate within the 12 month period. Looking forward, our adopted interest rate forecast has considered latest projections of CBA, ANZ, NAB and Westpac. The Big 4 banks forecast a cash rate between 3.35% and 3.60% by December 2025. For the same period, our adopted cash rate forecast of 3.70% reflects a spread of 0.10% - 0.35% above these projections. It is anticipated that a decline in the cash rate quicker than our conservative forecasts will be accretive to investor returns.
INTEREST RATE SENSITIVITY (YEAR 1)
Interest Rate (-50 Basis Points)
5.45%
Interest Coverage Ratio (ICR)
3.43x
Interest Rate (-25 Basis Points)
5.70%
Interest Coverage Ratio (ICR)
3.25x
Interest Rate (Trust’s current debt facilities variable interest rate)
5.95%
Interest Coverage Ratio (ICR)
3.09x
QUANTA INTEREST RATE FORECAST VS RBA CASH RATE FORECASTS
Interest Rate (+25 Basis Points)
6.20%
4.60%
Interest Coverage Ratio (ICR)
2.94x
4.40%
4.20%
Interest Rate (+50 Basis Points)
6.45%
4.00%
Interest Coverage Ratio (ICR)
2.81x
3.80%
3.60%
3.40%
3.20%
3.00%
Quanta
NAB
Westpac
CBA
ANZ
QUANTA TENNYSON STREET OFFICE TRUST | Information Memorandum
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