New York City Moody’s just-released report, “U.S. REIT and REOC Review and Outlook: Declining Fundamentals Cloud Outlook for Ratings,” stated it expects most rating actions among the REITs to be negative in the coming year. Retail, however, is among the sectors that are expected to be stable.
“Investment-grade REITs in particular entered this period of credit dislocation with sound balance sheets and largely unencumbered portfolios of assets," said Chris Wimmer, VP. "These strengths have allowed some REITs to successfully raise capital in the debt and equity markets, which they have used to lower refinancing risk and augment liquidity.”
A number of REITs, however, have seen increases in total leverage and secured debt levels, he said, thinning their cushions for covenant compliance, which has led to negative pressure on ratings and even to downgrades.
By property sectors, Moody’s has a negative rating outlook on industrial and lodging REITs. It has a stable rating outlook for retail, office, multifamily and healthcare REITs. From the beginning of 2008 through the end of April 2009, Moody’s reports it issued 38 downgrades and two upgrades across the REIT and REOC sector.
Further details on the new Moody’s report are available on Moodys.com.