The Associated Press July 13, 2010, 1:35PM ET

Fitch: REITs getting credit at more onerous terms

Fitch Ratings said Tuesday that real estate investment trusts have continued to have access to credit after the financial crisis began almost two years ago, although at generally more onerous terms.

The ratings firm analyzed credit renewals by REITs since January 2009 and concluded that REITs generally have been able to renew maturing, unsecured lines of credit throughout the downturn.

Nine U.S. equity REITs rated by Fitch have renewed credit lines on an unsecured basis since January of last year, Fitch said.

The ratings firm said the sector's continued access to unsecured credit is due to the companies' strong relationships with lenders and generally solid credit quality.

The median issuer default rating for real estate investment trusts rated by Fitch is "BBB."

Rolling over financing for commercial properties is common in the industry, but when lenders all but stopped making loans after financial crisis hit in the fall of 2008, loan defaults on commercial buildings began to mount. That forced many landlords to walk away from their holdings or file for bankruptcy protection.

Generally, REITs have been able to tap the equity markets for capital. That has helped bolster the sector's balance sheets and made REITs a safer bet for lenders.

While access to credit hasn't dried up for REITs, lenders have insisted on higher interest rates, term reductions and more stringent balance sheet requirements, Fitch said.

The firm said many lenders also have elected to slash the size of companies' credit lines.

Fitch doesn't anticipate broad rating changes as a result of the less favorable credit renewal terms many REITs are seeing.

The firm anticipates the REITs' efforts to cut back on their spending should offset the impact of smaller credit lines.


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