The first six months of 2014 have been smooth sailing for US equity REITs, with little change likely for the second half of the year, according to Fitch Ratings’ REIT Report Quarterly for Q2 2014.
Fitch expects US equity REITs will continue to have strong access to capital and solid liquidity.
Additionally, property-level fundamentals should improve moderately across most asset classes.
The median liquidity coverage ratio for select REITs is 1.9x for the 1 April 2014 to 31 December 2015 period, slightly down from the 2.2x ratio for the 1 April 2013 to 31 December 2014 period.
None of the 62 issuers included in Fitch's latest report have sub-1.0x base case liquidity coverage, a first since the firm began publishing these reports in 2007.
Share buybacks are becoming more appealing for US equity REITs, though they come with additional risks over time for bondholders. REIT stocks outperformed broader indices during this past quarter. That said, trading levels are generally below net asset value, making share repurchases an intriguing use of capital, a trend that Fitch views negatively.