Fitch Ratings has a "stable" outlook for the REIT industry heading into the second half of 2012, according to Steven Marks, managing director with the ratings agency.
In a video interview with REIT.com at REITWeek 2012: NAREIT's Investor Forum, Marks praised REITs for the strength of their access to capital.
"Liquidity and access to capital within the sector are really excellent—really the best we've seen in the last 10 years in terms of being able to access capital all up and down the capital stack," Marks said. As a result, according to Marks, REITs have "pretty good" liquidity coverages. He also said the industry's overall market fundamentals are promising.
On the other hand, Marks said high rates of leverage continue to weigh on REITs. Additionally, the health of broader economy is cause for concern, too.
"The economy is really a wild card within the sector, and companies really just need to prepare and, in our view, manage themselves conservatively so that they're able to be nimble regardless of the situation," Marks said.
Marks downplayed the prospects of mergers-and-acquisitions activity in the REIT industry in the course of the next year. In particular, he said not to expect mergers of public REITs coming through the pipeline. He also said the potential for REITs to capitalize on distressed asset sales is being overblown.
"We think that's a very slow and protracted process, and it's not as if there's going to be a tremendous amount of assets that come on the market immediately," he said. "These things grind very slowly and we just envision that it's not going to spur the M-and-A market generally for the rest of the year."
Marks said Fitch expects REITs will struggle to find growth opportunities in the near future.
"Because companies aren't doing that much development and we don't envision there being a lot of M-and-A activity in the sector, the growth really need to come through organic EBITDA (earnings before interest, taxes, depreciation and amortization) performance, and that's going to be a challenge for companies," Marks said. "In our view, if companies are managing that growth conservatively and are growing their development pipelines in a slow-and-steady fashion, that's a good thing."