Fiscal cliff shadows Fitch stable equity REIT outlook

As 2013 quickly approaches, Fitch Ratings reported Monday that the U.S. equity real estate investment trust sector appears stable heading into the new year.

Fitch based its outlook on several things including solid access to capital, good liquidity, improving fixed charge coverage and improving property-level fundamentals.

Click on the image below for a graph of the outlook. 

But one key area that could significantly impact the equity REITs moving forward is the looming fiscal cliff. A fiscal cliff fallout would corrupt consumer and business confidence.

“A fiscal cliff-induced recession, were it to take place, would hurt apartment, office and retail landlords the most,” said Fitch REIT Group Head Steven Marks. “Longer-term leases should insulate most companies from an immediate slowdown in the economy, but rent levels would likely decline.”

Fitch predicts issues will continue hold liberal access to record-low cost debt. Leverage, which was a concern for Fitch in regards to equity REITs, will likely remain elevated according to the outlook report.

In an effort to move away from reducing debt, Fitch expects to use proceeds from follow-on common equity offerings for development and other growth opportunities.

It is not predicted that REIT acquisition volumes will change much in 2013.

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