KUALA LUMPUR (Nov 23):'' Moody's Investors Service has a stable outlook for Singapore Real Estate Investment Trusts (S-REITs) and they are in a stronger financial position then during the global financial crisis.
It said on Wednesday that stress tests show CapitaMall Trust (A2 stable), Suntec REIT (Baa2 stable), Mapletree Logistics Trust (Baa1 stable), and K-REIT (Baa3 positive) run the most risk of exceeding Moody's expected leverage parameters in the event of a downward revaluation of PROPERTIES [].
"Although some of the trusts have limited leverage headroom, the stable outlooks for most of the ratings reflect the overall stronger financial position that these S-REITS have today, compared to before the global financial crisis of 2008-2009," says Moody's analyst, Alvin Tan.
He added that the S-REITs now have stronger balance sheets, and an established funding track record, even in adverse circumstances.
In his analysis, Tan added that S-REITs property valuations in the balance sheet have not recovered to pre-global financial crisis levels, despite Singapore's property prices already exceeding previous levels.
"Although a weaker global and Asian economy would lead to a price correction, the downside risk to S-REITs' credit and financial profiles is likely to be limited," he said.
In the report on the S-REITs, Moody's said the uncertain economic outlook could hurt property valuations -- as it could slow corporate expansions and the demand for additional space -- particularly in Singapore's office and business-park segments.
'A slowdown in Singapore's GDP growth, coupled with a large supply of new properties coming on stream, should also dampen rental growth, while debt-funded acquisitions have led to increased leverage for several S-REITs,' it said.
The ratings agency said the leverage for a number of Moody's rated S-REITs has increased towards the upper end of their longer-term targets of 40%-45%, which Moody's uses for most of the ratings. Any further move beyond these leverage parameters could put some ratings under pressure.
Hence, any downward property revaluation could weaken the ratings. Stress testing was performed on individual trusts on (1) a downward revaluation of properties by 10%; and (2) a downward revaluation of properties by 20%.
It said on Wednesday that stress tests show CapitaMall Trust (A2 stable), Suntec REIT (Baa2 stable), Mapletree Logistics Trust (Baa1 stable), and K-REIT (Baa3 positive) run the most risk of exceeding Moody's expected leverage parameters in the event of a downward revaluation of PROPERTIES [].
"Although some of the trusts have limited leverage headroom, the stable outlooks for most of the ratings reflect the overall stronger financial position that these S-REITS have today, compared to before the global financial crisis of 2008-2009," says Moody's analyst, Alvin Tan.
He added that the S-REITs now have stronger balance sheets, and an established funding track record, even in adverse circumstances.
In his analysis, Tan added that S-REITs property valuations in the balance sheet have not recovered to pre-global financial crisis levels, despite Singapore's property prices already exceeding previous levels.
"Although a weaker global and Asian economy would lead to a price correction, the downside risk to S-REITs' credit and financial profiles is likely to be limited," he said.
In the report on the S-REITs, Moody's said the uncertain economic outlook could hurt property valuations -- as it could slow corporate expansions and the demand for additional space -- particularly in Singapore's office and business-park segments.
'A slowdown in Singapore's GDP growth, coupled with a large supply of new properties coming on stream, should also dampen rental growth, while debt-funded acquisitions have led to increased leverage for several S-REITs,' it said.
The ratings agency said the leverage for a number of Moody's rated S-REITs has increased towards the upper end of their longer-term targets of 40%-45%, which Moody's uses for most of the ratings. Any further move beyond these leverage parameters could put some ratings under pressure.
Hence, any downward property revaluation could weaken the ratings. Stress testing was performed on individual trusts on (1) a downward revaluation of properties by 10%; and (2) a downward revaluation of properties by 20%.
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