REAL ESTATE

Moody’s outlook: REIT rating actions for retail remain stable

BY CSA STAFF

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.

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REAL ESTATE

Report: Starbucks demands 25% rent reductions

BY CSA STAFF

Seattle Starbucks is struggling to reduce rent levels, and is demanding that some of its U.S. landlords reduce lease rates by 25%, according to Bloomberg.com.

Starbucks reportedly sent letters to select landlords seeking rent reductions of 20% to 25%. The retail leasing division of Prudential Douglas Ellman is advising landlords to honor the request, the article said.

Rent-reduction efforts date back to January, an effort the chain hoped would help to slash overall expenses, Tara Darrow, a spokeswoman for the Seattle-based company, said in the article.

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Charming Shoppes pursues rent reductions

BY CSA STAFF

Bensalem, Pa. In its quest to further slash operating costs and rebuild revenue, Charming Shoppes is focused on getting rent reductions from existing landlords, GlobeSt.com reported.

A disappointing first fiscal quarter has the chain focused on improving sales, but it still has stores that are not meeting financial goals.

Charming Shoppes is trying to create a cost-effective partnership with these locations’ landlords in hopes that by lowering rent levels, “and partner with us to keep that store open and help make us profitable,” James Fogerty, president and CEO, said during the retailer’s first quarter conference call Wednesday, according to the report.

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