Kroll Bond Rating Agency (KBRA) has issued a new report, “REIT Private Placements – Lower Leverage, Better Execution?” The report makes the following key points:
- REIT total and unsecured leverage is considerably lower and more disparate than implied by commonly used credit metrics, or in CMBS multi-borrower deals.
- REIT private issuers are likely deterred from issuing unsecured notes in the public market by the $300 million minimum offering size for eligibility within the Bloomberg Barclays U.S. Bond Aggregate Index.
- Private placements likely represent a more advantageous execution for mid-size REITs seeking to right-size incremental debt, forward lock interest rates, and delay funding to align with timing of new investment or refinancing requirements.
- Yield premiums for private placements are likely skewed towards liquidity rather than credit or event risk.
- Leverage is lower for REIT private placement than public issuers, and event risk may be as well. Over the past 3 years, REIT private placement issuers have increased assets three times faster than public issuers.
To read the full report, please click here.
Related Publications: (available at www.kbra.com)
- REITs: A Deeper Dive on REIT Bond Leverage – AAA in Disguise?
- Global Equity REIT & REOC Rating Methodology
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
View source version on businesswire.com: http://www.businesswire.com/news/home/20180119005733/en/