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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About KBRA and KBRA Europe

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.