CreditSights Sees Low Risk of Default by Major US REITs
Commercial real estate fundamentals continue to decline, as evidenced by the bankruptcy filing of General Growth Properties. But CreditSights continues to believe that the risk of default by a major Real Estate Investment Trust is low.
“Assuming an economic recovery sometime in 2010, we estimate that CRE fundamentals will bottom out sometime in 2012 or 2013 with the quickest bounce back seen in the multifamily sector due to its short lease terms, ” CreditSights says in REIT 1Q09 Fundamentals: Still in the Early Innings.
We continue to believe that it is very unlikely that industry leaders Simon Property Group, Kimco Realty, Boston Properties, Vornado Realty, Equity Residential, and AvalonBay Communities will default in at least the next three years given their strong liquidity positions and assuming no material deterioration in the economy or capital markets from this point.
“Going forward, we believe that REIT equity prices will continue to be driven for the most part by property valuations which are in turn a function of fundamentals and available financing and buyers while REIT credit will continue to be driven predominately by liquidity and deleveraging activities.”
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April 23rd, 2009 at 12:00 pm
[...] downgrade the outlook for a bunch of related CMBS transactions to negative. Despite the GGP filing, CreditSights reiterated its view that no major REIT is likely to [...]