Real Estate Credit Markets Are Stable and
Merrie
Frankel, vice president and senior credit officer with Moody’s Investor
Service, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT's Investor Forum.
Frankel described the state of real estate credit markets today.
“I think the real estate credit markets are doing very, very well,” she said. “They’re stable and liquid, despite the uncertain macroeconomic environment.”
Frankel also gave some insight into the challenges that come with rating new companies.
"The challenges are primarily for the companies in understanding us and what we are looking for,” she said. “We have a methodology with about 16 elements, qualitative as well as quantitative, so setting themselves up to be rated and looking at their debt maturity schedule. I would say probably the number one issue is how much secured debt they have, because we do look at the amount of secured debt to gross assets.”
In 2012, a number of REITs were focused on de-leveraging their balance sheets. Frankel was asked if REITs have that same focus in 2013.
“The answer is actually yes and no. On the one hand, companies realized as a result of the recession that having less leverage is good,” she said. “But to the question are companies de-leveraging, I’m not quite sure as much as we thought they might. What’s happening is when you’re redeeming the old or issuing new at lower interest rates, you bring down your interest costs, your fixed charge coverage is going to get better and your net debt dividend is going to get better, but you overall leverage number will not necessarily change."
Frankel described the state of real estate credit markets today.
“I think the real estate credit markets are doing very, very well,” she said. “They’re stable and liquid, despite the uncertain macroeconomic environment.”
Frankel also gave some insight into the challenges that come with rating new companies.
"The challenges are primarily for the companies in understanding us and what we are looking for,” she said. “We have a methodology with about 16 elements, qualitative as well as quantitative, so setting themselves up to be rated and looking at their debt maturity schedule. I would say probably the number one issue is how much secured debt they have, because we do look at the amount of secured debt to gross assets.”
In 2012, a number of REITs were focused on de-leveraging their balance sheets. Frankel was asked if REITs have that same focus in 2013.
“The answer is actually yes and no. On the one hand, companies realized as a result of the recession that having less leverage is good,” she said. “But to the question are companies de-leveraging, I’m not quite sure as much as we thought they might. What’s happening is when you’re redeeming the old or issuing new at lower interest rates, you bring down your interest costs, your fixed charge coverage is going to get better and your net debt dividend is going to get better, but you overall leverage number will not necessarily change."
