{"id":1004075469,"date":"2013-06-05T10:59:45","date_gmt":"2013-06-05T18:59:45","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004075469"},"modified":"2022-12-08T18:54:42","modified_gmt":"2022-12-09T02:54:42","slug":"specialty-reits","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/specialty-reits\/","title":{"rendered":"Specialty REITs"},"content":{"rendered":"<p><em>By Maria Maslovsky,\u00a0Assistant Vice President &amp; Analyst for Commercial Real Estate Finance, Moody\u2019s Investors Service<\/em><\/p>\n<p><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/06\/Maslovsky_Maria-Headshot.jpg\"><img loading=\"lazy\" decoding=\"async\" data-attachment-id=\"1004075472\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/specialty-reits\/maslovsky_maria-headshot-2\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/06\/Maslovsky_Maria-Headshot.jpg\" data-orig-size=\"196,194\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;}\" data-image-title=\"Maslovsky_Maria Headshot\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/06\/Maslovsky_Maria-Headshot.jpg?w=196\" class=\"alignleft  wp-image-1004075472\" title=\"Maslovsky_Maria Headshot\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/06\/Maslovsky_Maria-Headshot.jpg\" alt=\"\" width=\"120\" height=\"120\" srcset=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/06\/Maslovsky_Maria-Headshot.jpg 196w, https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2013\/06\/Maslovsky_Maria-Headshot.jpg?resize=150,150 150w\" sizes=\"auto, (max-width: 120px) 100vw, 120px\" \/><\/a><\/p>\n<p>The variety of property<strong>&#8211;<\/strong>related companies choosing to become REITs has greatly expanded in recent years. \u00a0Moody\u2019s maintains ratings on datacenter, self-storage and prison REITs, as well as on a cell tower REIT.\u00a0 Recently a major casino player announced a plan for an OpCo\/PropCo split and a REIT conversion for the PropCo. \u00a0All of these businesses are looking to take advantage of the tax savings and easier access to the equity markets that REITs have, as well their often favorable stock valuations.<span style=\"font-size: 13px;line-height: 19px\">\u00a0<\/span><\/p>\n<p>Each category of specialty REITs brings unique features key to its analysis within the framework of Moody\u2019s REIT rating methodology.\u00a0 One of the unifying themes for specialty REITs is the limited alternative use for their assets as compared to the traditional property sectors. \u00a0Moody\u2019s considers these asset<strong>&#8211;<\/strong>quality issues carefully and incorporates them into its ratings.<\/p>\n<p>Fueled by unrelenting demand for data both from consumers and businesses, the datacenter space has grown tremendously in recent years. \u00a0The proliferation of smart phones and tablets, in addition to conventional computers, as well as the mounting number of available applications (particularly games and video), support the sustainability of demand for computing power, at least in the medium term.\u00a0 Moody\u2019s carefully considers the strong favorable demand trends for datacenters and weighs them against the potential for oversupply.\u00a0 Moody\u2019s rates three datacenter REITs: Digital Realty Trust (Baa2\/stable), DuPont Fabros (Ba1\/stable) and CyrusOne (B1\/stable).\u00a0<span style=\"font-size: 13px;line-height: 19px\">\u00a0<\/span><\/p>\n<p>Moody\u2019s rates one cell tower REIT, American Tower (Baa3\/stable), which also benefits from the strong demand for data transmission that is buoying the performance of datacenters, although its customers are primarily the large wireless carriers.\u00a0 Two key considerations in Moody\u2019s approach to rating American Tower include its aggressive acquisition stance globally, as well as the limitations regulatory and physical constraints place on additional supply.<\/p>\n<p>The self<strong>&#8211;<\/strong>storage sector is currently benefitting from limited new supply as a result of lender retrenchment, although Moody\u2019s believes new product will come on line in the medium term. \u00a0The self-storage industry is dominated by four public REITs that bring to bear their scale and cost of capital advantage to fund large advertising programs, particularly use of internet media. \u00a0Still, the space remains very fragmented, with a lot of small private players, due primarily to the simplicity of operations and relatively low break-even occupancy (in the 70 percent range).\u00a0 Positively, self-storage REITs proved resilient in the most recent downturn and, to a degree countercyclical in a housing-driven recession. \u00a0Moody\u2019s rates two self-storage REITs, Public Storage ((P) A2\/stable), the leader in the industry by far, and CubeSmart (Baa3\/stable). Public Storage has the highest rating of any REIT in North America that Moody\u2019s rates.<\/p>\n<p>Prison REITs operate private correctional facilities under contract from either a state or the federal government. \u00a0Given the strained budgets and current overcrowding in many federal and some state prisons, the demand for private corrections operators is strong. \u00a0The key risks for this sector include negative public sentiment and headline risk, as well as the ability of the governmental entities to cancel contracts with relatively short notice.\u00a0 Still, the two prison REITs rated by Moody\u2019s, Corrections Corporation of America (Ba1\/positive, senior unsecured debt) and Geo Group (B1\/positive, senior unsecured debt), have performed well in recent years.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Maria Maslovsky, Assistant Vice President &amp; Analyst for Commercial Real Estate Finance, Moody\u2019s Investors Service: The variety of property-related companies choosing to become REITs has greatly expanded in recent years.  <\/p>\n","protected":false},"author":1591,"featured_media":1004075472,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[37301],"tags":[],"class_list":["post-1004075469","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v28.0 (Yoast SEO v28.0) - 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