Industry Research: Real Estate Investment Trusts

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Soft equity prices signal weakening REIT financial profiles
  • Industry Research: Real Estate Investment Trusts
  • Year : Mar 2020
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GCR expects the financial profiles of South African REITs to weaken, as the range of funding options available to them increasingly narrows. Base portfolio valuations have stagnated or declined over the last 18 months, and with further value erosion likely, funds with high gearing and/low covenant headroom will struggle to realise capital from new equity or asset sales in time to stabilise their leverage ratios.

Additional Information

Although all REITs are facing a challenging medium-term outlook, GCR does not expect the impact of the funding pressure to be uniform across the sector. Specifically, funds whose LTVs are managed at 30%-35% or lower, continue to depict sustained income stability, sound debt service, and well-managed liquidity profiles are expected to sustain strong or stable credit risk profiles

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