REIT Leverage Improving, Fixed Income Analysts Say

A panel of analysts discussed REIT leverage during the first day of Nareit’s REITworld: 2019 Annual Conference in Los Angeles.

Ray Huang, senior vice president at PIMCO, said that while leverage is important when considering investments, it’s not the “be all, end all.” He added that within the REIT space, not all debt-to-EBITA is created equal.

Ana Lai, senior director and analytical manager at S&P Global Ratings, said that leverage in the REIT space has improved balance sheets significantly since the last market downturn in 2009, from an average leverage for the portfolio of about eight times total debt-to-EBITA, to now at about six times.

Lai also said that REIT performance has been very good over the past several years, as evidenced by the migration of some REITs to the A category. “At the same time, leverage is very high compared to other sectors,” she said.

Mark Streeter, managing director at J.P. Morgan, said that the rated REIT bond market is currently just under $200 billion, or one-seventh of the overall $1.4 trillion market. Streeter moderated the session.

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