US REITs Recovering but Not Out of the Woods
CreditSights sees signs of recovery in Real Estate Investment Trusts, but also cautions that less than half the companies they follow have sufficient cash and credit capacity to meet all unsecured maturities and put options through 2012. “Overall credit profiles have improved and major liquidity holes have been plugged on the back of a sector-wide re-equitization and deleveraging that began in late March, ” CreditSights says in REIT Liquidity: Adventures in Deleveraging.
The improvement in leverage and liquidity and the market’s realization that a near-term REIT sector apocalypse may not be in the cards has in turn resulted in strong equity returns and much tighter credit spreads though the sector is not quite out of the woods yet on the liquidity front.
“With roughly $15 billion of unsecured debt maturities, revolver expirations, and putable converts facing our coverage list alone through 2011 and about $11 billion more in 2012, REITs will still need to raise more equity, monetize and/or sell assets, begin issuing unsecured debt again, seek joint venture financing, or otherwise shore up liquidity in order to survive and meet obligations.”
“Our conclusion is that less than half of our companies currently have sufficient cash and credit capacity to meet all unsecured maturities and put options through 2012 though many are on the cusp of full coverage. If the sector continues to experience the pace of deleveraging seen year-to-date, many REITs in our coverage list should be able to accumulate enough liquidity to meet these obligations by year-end using some or all of their liquidity levers.
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