As the global credit crisis worsens, Australia’s rated real estate investment trusts (REITs) have largely maintained a stable credit quality over the past six months, according to Standards & Poor’s (S&P).
According to a S&P industry report card, as “global financial woes fray credit quality, Australia’s rated REITs are still holding firm, for now”.
S&P credit analyst Craig Parker said despite the scarcity of debt funding and rising capitalisation rates, the majority of their rated REIT products have maintained their ratings and outlooks.
“Indeed, eight of our 10 rated Australian REITs have a stable outlook and most remain clustered around the A investment grade rating level,” he said.
According to Parker, their stable albeit cautious perspective on rated REITs was due to strong growth in commercial real estate fundamentals, adequate liquidity in the REIT sector to cope with any forthcoming debt maturities and a large amount of the sector’s stabilised rental income coming from domestic sources.
The report outlined a number of potential risks facing the sector including a deceleration in development activity, the deleveraging task facing issuers with high debt levels and restricted access to capital markets.
