Fitch Ratings has awarded stable outlooks to two Australian REIT issues in light of their leading positions in the Australian real estate market.
Shopping centre company Scentre Group was rated as A/Stable while commercial property group Mirvac Group was rated as A-/Stable. The companies hold two of the largest REITs in Australia at $54 billion and $11 billion respectively.
Fitch said the high rating reflected the high visibility of future rental income streams, their leading positions in the market and their commitment and flexibility in managing financial structures to levels commensurate with their ratings.
Both firms were able to respond to changing demand trends, Fitch said, which reduced the cyclical valuation volatility of their portfolios and to take advantage of the prime locations of their properties.
However, the ratings agency noted REITs which had exposure to lower grade and regional properties were likely to come under pressure in the future as the property market begins to cool, which would lead to valuation declines.
These types of REITs would be worse-affected than those which had exposure to high quality assets in major domestic cities.