REIT Leverage Perspectives

Moody's out with a piece, in which it joins the S&P chorus (well, not technically a chorus if just one is singing) Zero Hedge wrote about earlier, in which it seems the two major rating agencies are now taking both REITs and associated securitization conduits to the woodshed, and making it inevitable that Geithner adjusts the requirements for CMBS TALF participation. For once being a 1-10 year lagging indicator may actually be a market normalizing influence.

In the meantime, I present some of the relevant leverage charts from Moody's piece titled "US REIT and REOC Review & Outlook: Declining Fundamentals Cloud Outlook for Ratings." These should probably be kept in mind as one considers Bill Ackman's "bull" case in GGP. The debt/EBITDA trends should soothe all those who keep buying follow on after follow on offering. Come refi time, those 10% cap rates will also make sure their lives are a walk in the park.

Comments

[Westcoaster:]

God, Tyler you really hate CRE as an investment don't you. Stocks, bonds, all of my businesses are down between 7 to 50 % in the last year and half and my own real estate investments EBITA is flat just like your chart above. Believe me being flat in these times is a lot better than being down in earnings or losing money. I agree the REITS debt ratios are high but I don't see 10% cap ratios around here, and you can't deny that they are still bringing in the earnings.

Jun 02 11:26 AM