Wednesday, November 2, 2011

Asia-Pac REITS can withstand volatile conditions

KUALA LUMPUR, (Nov 2):'' Asia-Pacific rated real estate investment trusts and real estate operating companies (REITs) are well prepared to face higher volatility in global conditions, says Standard & Poor's Ratings Services.

It said on Wednesday the REITs have made positive steps by reducing their debt burdens and also diversifying their funding sources away from the banking sector.

The ratings agency said in an article, 'Asia-Pacific REITs stand in good stead to face shaky conditions", hat these measures have enable them to withstand the volatile conditions, including higher funding costs.

"Funding costs could become more expensive for rated Asia-Pacific REITs, as seen in the widening of credit default swap spreads," S&Poor's credit analyst Craig Parker said.

"Combined with stricter bank regulations, bank debt costs could push higher, affecting Asia-Pacific REITs who remain dependent on bank debt for short-to-medium term funding. In addition, fragile consumer sentiment in the region could result in lower leasing demand and retail sales."

S&P noted that the REITs had adopted more conservative financial profiles and maintained high occupancy levels in their portfolios.

'With prudent portfolio management, REITs are well placed to counter the potentially tougher conditions, in our opinion," it said.

Indeed, Asia-Pacific real estate entities rated by S&P's, whose assets range from malls to skyscrapers, remain largely entrenched in the investment-grade rating category. The ratings agency said most of the 38 issuers rated in the region were around the 'A' category.

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