{"id":1004106854,"date":"2014-11-04T14:23:42","date_gmt":"2014-11-04T22:23:42","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004106854"},"modified":"2022-12-03T06:52:00","modified_gmt":"2022-12-03T14:52:00","slug":"strong-corporate-governance-benefits-u-s-equity-reit-bondholders","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\/","title":{"rendered":"Strong Corporate Governance Benefits U.S. Equity REIT Bondholders"},"content":{"rendered":"

By Sean Pattap, Senior Director, U.S. REITs, Fitch Ratings\"Sean<\/a><\/i><\/p>\n

Numerous U.S. REIT corporate governance attributes benefit bondholders, though there is one credit negative that investors should consider.<\/p>\n

Recent investor activism has spurred investors to ask Fitch Ratings about governance attributes that impact REIT bondholders. Corporate governance analysis is an integral part of evaluating a bond\u2019s risk profile because certain changes in policies may weaken a company\u2019s anti-takeover defenses or raise the influence of activists, thereby increasing implied riskiness of a bond.<\/p>\n

Of 64 REITs that Fitch examined, the limited number of staggered boards, high percentage of independent board members, experienced board membership, the widespread incorporation of credit metrics into management compensation and board background diversity are positives for bondholders. One credit negative, however, is the preponderance of REIT CEOs that serve as independent members of other boards.<\/p>\n

Only 11 percent of REITs that Fitch analyzed have staggered boards, a low percentage.\u00a0 Of note when considering cliff risks to bondholders posed by investor activism, U.S. equity REITs have bond indentures that include financial covenants. \u00a0Therefore, a risk to REIT bondholders is that activists could replace multiple board members, which could lead to decisions that weaken a REIT’s credit profile within the confines of covenants.<\/p>\n

A board that is independent, active, knowledgeable and committed signals a robust governance framework.\u00a0 Fitch views positively boards that include non-executive members with diverse skills, views and professional experience. \u00a0\u00a0On average, 78 percent of board members are independent, and 39 percent of independent board members do not have a commercial real estate background. These are both credit positives as they are indicative of a broad representation of perspectives and balance of members\u2019 expertise on REIT boards.<\/p>\n

Fitch views negatively REIT CEOs that serve as independents on multiple boards (63 percent), as it may be challenging to effectively balance day-to-day CEO responsibilities with overseeing other companies.<\/p>\n

Of the 64 companies examined, 39 (61 percent) incorporate at least one credit metric element into management compensation. \u00a0The incorporation of credit metrics into management compensation is unequivocally a positive for bondholders and provides tangible evidence that the board considers the interests of bondholders as opposed to shareholders exclusively.<\/p>\n","protected":false},"excerpt":{"rendered":"

By Sean Pattap, Senior Director, U.S. REITs, Fitch Ratings: Numerous U.S. REIT corporate-governance attributes benefit bondholders, though there is one credit negative that investors should consider.<\/p>\n","protected":false},"author":1687,"featured_media":1004106855,"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-1004106854","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"yoast_head":"\nStrong Corporate Governance Benefits U.S. Equity REIT Bondholders - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Strong Corporate Governance Benefits U.S. Equity REIT Bondholders\" \/>\n<meta property=\"og:description\" content=\"By Sean Pattap, Senior Director, U.S. REITs, Fitch Ratings: Numerous U.S. REIT corporate-governance attributes benefit bondholders, though there is one credit negative that investors should consider.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2014-11-04T22:23:42+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-03T14:52:00+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2014\/11\/Sean-Pattap.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"336\" \/>\n\t<meta property=\"og:image:height\" content=\"336\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Sean Pattap\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\\\/\"},\"author\":{\"name\":\"Sean Pattap\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/#\\\/schema\\\/person\\\/1a30887e997caa797c8938140f773891\"},\"headline\":\"Strong Corporate Governance Benefits U.S. Equity REIT Bondholders\",\"datePublished\":\"2014-11-04T22:23:42+00:00\",\"dateModified\":\"2022-12-03T14:52:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\\\/\"},\"wordCount\":364,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/wp-content\\\/uploads\\\/sites\\\/46\\\/2014\\\/11\\\/Sean-Pattap.jpg\",\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\\\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\\\/\",\"url\":\"https:\\\/\\\/www.commercialsearch.com\\\/news\\\/strong-corporate-governance-benefits-u-s-equity-reit-bondholders\\\/\",\"name\":\"Strong Corporate Governance Benefits U.S. Equity REIT Bondholders - 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