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Fitch: Rising Rates Loom as U.S. REITs Line of Credit Terms Improve

February 18, 2014



NEW YORK--(BUSINESS WIRE)-- U.S. equity REITs increased their unsecured bank borrowing capacity more frequently and at more attractive terms over the last two years, though the prospect of rising interest rates may call their ability to continue doing so into question, according to Fitch Ratings in a new report.

'The interest rate environment will be challenging and rating actions could be predicated on a REIT's ability to address an increase in interest rates,' said Managing Director and U.S. REITs group head Steven Marks. 'The prospect of rising rates and how it affects unsecured lines of credit and pricing also bears close watch.'

This comes as equity REITs take increasing advantage of continued favorable bank lending trends. REITs have boosted unsecured lines of credit by approximately 49% compared to October 2011. The rates for borrowing credit lines have also fallen, though Fitch does not believe these trends are sustainable and will likely increase in time.

'REITs trying to become unsecured bond issuers are using both unsecured revolving lines of credit and unsecured term loans to unencumber the portfolio,' said Marks.

An encouraging sign is that REITs are continuing to unencumber their portfolios and remove secured debt from their capital structures. Draws on unsecured revolvers and unsecured term loans across issuers accounted for 10% of total debt outstanding as of Sept. 30, 2013, up from 8% roughly two years ago. During the same period, secured debt declined to 46% from 49%.

Fitch's 'Trends in U.S. Equity REITs Unsecured Lines of Credit' report is available at 'www.fitchratings.com' or by clicking on the below link.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research: Trends in U.S. Equity REITs Unsecured Lines of Credit

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=733160

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Boris Alishayev

Associate Director

+1-212-612-7880

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Steven Marks

Managing Director

+1-212-908-9161

or

Media Relations:

Sandro Scenga, +1-212-908-0278 (New York)

sandro.scenga@fitchratings.com


Source: Fitch Ratings


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