Equity One REIT's Potrero Center. (Photo: Equity One)Equity One REIT's Potrero Center. (Photo: Equity One)

Despite the spectre of rising interest rates, equity REITs listed in the United States are well positioned heading into 2017, Fitch Ratings said in its latest quarterly update report.

According to the agency, median liquidity coverage ratio for select US equity REITs is 1.8 times for the October 2016 to December 2018 period, with the lowest coverage at 1.3 times for retail REITs, and the highest coverage at 2.7 times for health care REITs.

“REITs have been vigilant in preparation for less favorable economic conditions or the inevitable turn in the commercial real estate cycle”, said Fitch Ratings.

“REIT issuers have constructed liquidity buffers by reducing unsecured line of credit balances, building cash on balance sheet, and pre-funding and laddering debt maturities”, it added.

The ratings agency also noted that US-listed REITs’ median cash balances increased by nearly 50%, while average debt maturities through 2018 were reduced by more than USD800 million year-over-year.

“These credit-friendly financial policies have been consistently adopted and maintained across the sector and are a major consideration in Fitch's positive sector outlook for 2017”, the agency concluded.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.