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Fitch: Banner Year for U.S. Equity REIT Capital Raising and Good Liquidity; Geopolitical Risks Loom

NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: 2Q14 U.S. Equity REIT Liquidity Update: A Banner Year (So Far) http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=759968

The median liquidity coverage ratio for select U.S. equity real estate investment trusts (REITs) is 1.3x for the July 1, 2014-Dec. 31, 2016 period, flat year-over-year, according to Fitch Ratings' REIT Liquidity Update. Record capital raising in the unsecured bond and common equity markets thus far in 2014 has resulted in healthy dry powder from revolver availability and nearly all issuers being well-poised to address upcoming maturities and capital expenditures.

Year-to-date, REITs have issued $22.9 billion of common stock and $28.0 billion in unsecured bonds, both of which are well on track to exceed records set in 2013. Bond issuance has spanned the credit curve and duration points along the yield curve and included traditional and convertible notes and so-called green bonds. REITs have entered into $6 billion of term loans year-to-date, which if sustained would exceed the $11.3 billion record set in 2012. Only the preferred stock market is lagging below 2013 levels.

The median percentage drawn from U.S. equity REITs' revolving credit facilities was 8.9% as of June 30, 2014, down from the mid 20% range observed from 2010 to 2012. Bond investors have supported inaugural and seasoned borrowers alike, enabling issuers to pay down revolver borrowings. In addition, after starting 2014 just above 130 basis points, U.S. equity REIT spreads to worst have sustained around 110 bps since early April, indicative of increased demand for REIT bonds.

Geopolitical risks remain elevated and it remains to be seen whether the flight to quality for safe haven assets such as U.S. Treasuries and investment grade U.S. bonds will sustain indefinitely or whether such risks will lead to spread widening. Normalizing monetary policy coupled with geopolitical uncertainties could lead to volatility in market pricing and therefore a de-stabilization of U.S. equity REIT liquidity positions.

The full report, '2Q14 U.S. Equity REIT Liquidity Update: A Banner Year (So Far)' is available at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Related Research

--'Fitch Fundamentals Index - U.S. Index Trend Analysis - 2Q14' (July 2014);

--'Global Economic Outlook' (June 2014);

--'2014 Midyear Outlook: U.S. Equity REITs' (June 2014);

--'Corporate Rating Methodology' (May 2014);

--'1Q14 U.S. Equity REIT Liquidity Update: Marching to the Beat of the Same Drum' (May 2014);

--'Rating U.S. Equity REITs and REOCs - Sector Credit Factors' (February 2014);

--'Trends in U.S. Equity REITs Unsecured Lines of Credit - Bigger, Cheaper, Longer' (February 2014);

--'U.S. REIT Property-Level Volatility - Moderation Is the Key' (November 2013);

--'Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit Analysis' (December 2013);

--'Recovery Ratings and Notching Criteria for Equity REITs' (November 2013);

--'Contemplating the REIT Credit Cycle' (October 2013).

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Contacts

Fitch Ratings
Sean Pattap, +1-212-908-0642
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
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Boris Alishayev, +1-212-612-7880
Associate Director
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Steven Marks, +1-212-908-9161
Managing Director
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Media Relations
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