Fitch: Liquidity of U.S. Equity REITs Weakening

NEW YORK--(BUSINESS WIRE)--Liquidity of U.S. equity real estate investment trusts (REITs) is showing signs of drying up, according to Fitch Ratings, which today completed an analysis of U.S. REIT liquidity. With U.S. equity REITs situated at the nexus of a recessionary economy, weakening property fundamentals, near-frozen debt capital markets and weakened stock prices, the implications for liquidity are broad.

“management team focus on cash preservation and access to multiple sources of liquidity will remain an important aspect of Fitch's REIT ratings”

While most REITs maintain liquidity surpluses, the number of REITs with liquidity shortfalls has increased. "We are more concerned about the refinancing and funding risks for companies with liquidity shortfalls, and such companies face potential ratings downgrades should funding markets not reopen," said Steven Marks, Managing Director and U.S. REIT Group Head for Fitch.

Moreover, with commercial real estate debt markets stressed and asset sale opportunities limited, REITs are now largely reliant on bank revolving lines of credit to fund near term maturities, which concerns Fitch as the banking system is significantly strained.

While Fitch found that health care and self-storage REITs have improved their liquidity positions in recent months, each other sector has weaker liquidity on average. That being said, REITs' capital structures have not changed fundamentally during the current economic downturn, according to Fitch. Going forward into 2009, "management team focus on cash preservation and access to multiple sources of liquidity will remain an important aspect of Fitch's REIT ratings," said Marks.

'U.S. REIT Liquidity - On Thinning Ice,' is available at www.fitchratings.com under the following headers:

Financial Institutions >> REITs >> Special Reports

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.