REIT Risks: A List Of Top Factors
Beth Mattson-Tieg’s nifty deck at NREIOnline takes a useful look at the leading risk factors felt today by real estate investment trusts (REIT). The REIT marketplace is a prismatic view into commercial real estate fundamentals while they put prices on portfolios and sectors in ways that make investment easy. This means that what REITs face are good indicators of what the broader CRE market faces, and that facts on the ground often mean similar things to portfolio managers as they do to individual owners and investors.
Where do the big risks lie in the list? Does industry consolidation come in as a higher risk than environmental liabilities? Where do changes to REIT tax benefits rank? And capital acquisition — it it still brutally difficult? On that last point:
Although REITs tend to be a little more conservative on leverage, access to capital remains a concern as a large portion of the REIT market is continuing to trade at a discount to net asset value (NAV). After record issuance in 2015, when U.S. equity REITs issued $75.6 billion in common and preferred equity, unsecured bonds and term loans, overall capital issuance through March 21 is down by 18.6 percent compared to the same period a year ago, according to Fitch Ratings. In addition, REITs are concerned about the disruption in the CMBS market over the past nine to 10 months.