Fitch Analyst Expects Solid Occupancy Rates for REITs in 2018

Steven Marks, managing director at Fitch Ratings, joined Nareit for a video interview at REITworld 2017.

Marks commented on some of the trends he is seeing in REIT bank borrowing exposure.

“It’s one of the few things we’re concerned about when it comes to REIT liquidity and access to capital,” Marks said. He noted that the sum of bank borrowing relative to the overall debt capital structure is currently about 18 percent, compared with a level of around 8 percent in 2008 to 2009.

Marks said that if REITs need to obtain incremental capital from banks and banks are not able to lend, “that could create an issue regarding access to capital and broader liquidity concerns.”

Marks also noted that assets in non-core REIT sectors are assessed through a more traditional lens than assets in core REIT sectors that benefit from a fairly robust mortgage market. Such non-core REIT assets require a lower leverage level for a given rating category, he explained.

Looking to 2018, Marks said he expects REITs to post positive same-store growth and “good” occupancy levels. As for possible concerns, he noted that it remains unclear where the bottom lies for class-B mall assets.

Marks also highlighted concerns regarding skilled nursing operators in connection to reimbursement rates and overall profitability.