NEW YORK--()--Fitch Ratings today published an updated sector-specific criteria report that addresses Fitch's methodology on analyzing the credit risk of U.S. equity real estate investment trusts (REITs) and real estate operating companies (REOCs). The report, titled 'Criteria for Rating U.S. Equity REITs and REOCs,' updates and replaces a report of the same title dated Feb. 27, 2012.
Fitch's approach for analyzing U.S. equity REIT and REOC credit risk continues to have three primary components: a review of management, a financial analysis, and a review of the issuer's property portfolio.
Factors having an impact on management review include the quality of the team, adaptation, financial discipline, strategy, experience and track record, and corporate governance.
Financial factors include a review of recurring cash flow and fixed charge coverage, financial flexibility, access to capital, liquidity, contingent liquidity from unencumbered assets, as well as balance sheet, capitalization, and leverage. Fitch primarily utilizes base case projections, and also uses stress case projections and a risk-adjusted earnings stress scenario in the rating process.
Factors pertinent to the property portfolio include investment granularity, market focus, and asset quality, particularly location, tenant profiles, lease expirations, lease renewals rates, lease duration, and lease rollover rates.
The criteria report addresses other factors such as development, joint ventures, covenants, and peer analysis.
The full report is available on Fitch's web site at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Mortgage REITs and Similar Finance Companies,' Feb. 26, 2013;
--'Recovery Rating and Notching Criteria for Equity REITs,' Nov. 12, 2012;
--'Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis,' Dec. 13, 2012.
--'Parent and Subsidiary Rating Linkage,' Aug. 8, 2012.
--'Distressed Debt Exchange,' Aug. 8, 2012.
--'Corporate Rating Methodology,' Aug. 8, 2012.
Applicable Criteria and Related Research Criteria for Rating U.S. Equity REITs and REOCs
Corporate Rating Methodology
Recovery Ratings and Notching Criteria for Equity REITs
Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis
Parent and Subsidiary Rating Linkage
Distressed Debt Exchange