(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: 2Q15 U.S. Equity REIT Liquidity: Cracks Beginning
to Show
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870433
NEW YORK, September 10 (Fitch) Though still strong, liquidity is showing some
initial signs of weakening for U.S. equity REITs, according to Fitch Ratings.
The median liquidity coverage ratio for select U.S. equity REITs is 1.2x for the
July 1, 2015-Dec. 31, 2017 period. This represents a slight decline from the
three prior comparable timeframes. 'Lack of access to the public unsecured bond
markets is forcing potential first-time REIT issuers to consider alternative
sources of capital and rely more heavily on term loans and revolving lines of
credit,' said Managing Director Steven Marks. Further, 10-year bond maturities
from relatively heavy 2007 issuance are a meaningful liquidity use for several
issuers, pushing down liquidity coverage.
The push for inclusion of Change of Control (CoC) provisions in public bond
indentures that began following Blackstone (NYSE:BX)'s announced acquisition of Excel
Trust has been a major factor halting public unsecured bond issuance for
potential first-time issuers. After a record setting first quarter of unsecured
issuance, the second quarter slowed as investors and new issuers negotiate CoC
provisions amidst an evolving macro backdrop. 'While seasoned REIT issuers have
been unaffected, public issuance volume could decelerate even further should
bond investors demand CoC provisions for seasoned, larger or higher-rated
issuers,' said Marks.
The difference between REIT and Corporate bond spreads (as measured by yield to
worst) has fallen to as low as three basis points in the past month after
hovering in the 10-15 basis point range through early 2Q'15. Concerns
surrounding monetary policy and global growth have impacted both corporate and
REIT credit spreads; however corporate credit spreads have risen at more than
twice the rate of REIT spreads since early 2014 due primarily to oil and gas
issuers.
'2Q15 U.S. Equity REIT Liquidity Update: Cracks Beginning to Show', is available
at 'www.fitchratings.com'.
Contact:
Zachary Klein
Associate Analyst
+1-212-908-0841
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY 10004
Steven Marks
Managing Director
+1-212-908-9161
Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email:
sandro.scenga@fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
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