Moody’s: M-F REITs Take Steps to Weather Sector Downturn
- Apr 07, 2009
As the single-family housing market went kaput, the multifamily market picked up the slack, but with the economy in a freefall, even the rental market is on shaky ground. However, multi-family REITs, according to Moody’s Investors Service, have shored up their operations in an effort to brace for the worst.The apartment sector is beginning to lose much of its luster, as increasing job loss chips away at occupancy rates. However, many multi-family REITs have taken various steps to protect themselves. Among the list of strategic moves pursued is the reduction of development activities, the decreasing of asset sales, the increased use of Fannie Mae and Freddie Mac debt, and for some, the reduction of the cash portion of regular common dividends. From what Moody’s observes, those steps are working. Of the nine multi-family REITs the credit ratings and risk analysis firm rates, only one has a negative outlook, while the remaining eight have stable outlooks. Even their liquidity looks good; aside from one company, at the close of 2008 the REITs had an average bank line capacity of nearly 80 percent. “As management teams appropriately focus on the challenging conditions, most balance sheets are well-prepared for the next 12 to 18 months,” Chris Wimmer, Moody’s vice president, noted in a prepared statement. Recent news indicates that some REITs in the multi-family game are faring well. Last month, Birmingham, Ala.-based Colonial Properties Trust, which owns multi-family, office and retail assets, closed a $350 million credit facility–secured by 19 apartment communities–that was originated by PNC ARCS L.L.C. for repurchase by Fannie Mae.