Fitch: Gray Clouds Persist for Equity REITs Despite Rays of Sunshine

NEW YORK, NY--While recent financial market improvements are allowing equity REITs to execute opportunistic actions to reduce financial pressures, several challenges remain, according to Fitch Ratings in the latest edition of its 'REIT Report Quarterly'.

"Most REITs will need to address tenuous access to financing across the capital markets,’ said Managing Director and REIT group head Steven Marks. (top right photo)

"REITs are also contending with an unprecedented downturn in property markets, as indicated by increasing tenant defaults and reductions in net operating income."

Other potentially adverse developments awaiting equity REITs include the sizable overhang of debt maturities in 2011 and 2012 and limited visibility regarding net operating income capitalization rates, which continues to stress commercial property values. Many equity REITs will face challenges to maintain current rating levels.

During the second quarter of 2009, Fitch assigned a rating to SL Green Realty Corp and assigned a new security-specific rating to Westfield Group’s US$700 million debt issue.

While Fitch affirmed 11 REITs, Fitch also revised the Rating Outlook on six of these companies to Negative from Stable. Fitch downgraded nine REITs, with eight of the companies remaining either on Rating Watch Negative or with a Negative Outlook.

Fitch maintains a Negative Outlook for the U.S. Equity REIT sector, indicating an increased likelihood for downgrades or Negative Rating Watches/Outlooks.

Additionally, due to falling valuations and rents, and despite the fact that Fitch-rated issuers in this sector generally have liquidity surpluses, the rating outlook for European REITS is negative. However, individual issuer Outlooks and Watches are the best indicators of future rating direction.

Other items in this edition of Fitch's 'REIT Report Quarterly' include an overview of recent rating actions, summary of two special reports, seven market commentaries, and links to recent Fitch research.

The newsletter is available on the Fitch Ratings web site at 'www.fitchratings.com' under the following headers: Financial Institutions >> REITs >> Newsletters

Contacts: Steven Marks +1-212-908-9161, New York; Julian Crush +44 20 7682 7370, London; or Ben McCarthy +61 2 8256 0388, Sydney.

Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com;

Peter Fitzpatrick, London, Tel: +44 (0)20 44 20 7417 4364, London, Email: peter.fitzpatrick@fitchratings.com