Market Overview

KBRA Bond Rating Agency Publishes Research: REIT Q2'18 Credit Update - REITs Find Their Mojo, Leverage Back To Record Low

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Kroll Bond Rating Agency (KBRA) issues a new report, "REIT Q2'18 Credit
Update - REITs Find Their Mojo, Leverage Back To Record Low". The report
makes the following key points:

  • REIT debt-to-market leverage has yet again reached record lows
    following the recovery in share prices from their Q1 sell-off, with
    median debt-to-market leverage declining to 30.2% for REIT unsecured
    note issuers in the public and private placement markets.
  • With improved equity market valuations, REITs have access to a broad
    menu of capital raising alternatives, particularly within the
    unsecured debt market where private placements and term loans have
    gained share from the public market, offering competitive pricing and
    more flexible terms.
  • Alignment of shareholder and creditor interests is evident in the REIT
    sector, where lower-leverage REITs have substantially outperformed in
    the equity market, engendering a greater willingness to raise equity,
    expand portfolios, and enhance diversification.
  • Lower borrowing costs for REIT unsecured debt than mortgage loans
    further align shareholder and bondholder interests, with unsecured
    borrowers incented to avoid and retire mortgage debt.
  • REIT unsecured debt ratings appear low relative to corporate sectors
    with weaker covenant protection and CMBS with greater "look-through"
    leverage and less favorable asset quality.

To read the full report, click here.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
designated as a designated rating organization by the Ontario Securities
Commission for issuers of asset-backed securities to file a short form
prospectus or shelf prospectus, is recognized by the National
Association of Insurance Commissioners as a Credit Rating Provider, and
is a certified Credit Rating Agency (CRA) by the European Securities and
Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is
registered with ESMA as a CRA.

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