RPT-Fitch: U.S. REITs and MLPs Are More Similar Than Not
April 16 (Reuters) - (The following statement was released by the rating agency)
U.S. real estate investment trusts (REITs) and master limited partnerships (MLPs) have more similarities than differences, though some of the contrasts are notable, according to Fitch Ratings in a new report.
REITs and MLPs are corporate bond issuers that are generally rated in the 'BBB' category and have similar liquidity needs and tax considerations. One notable difference between the two, however, is leverage.
The debt levels of 'BBB' rated REITs hover generally in the 5-6x range, while similarly rated MLPs have leverage more near the 3.5-4.5x range. One reason why REITs can operate with higher leverage than MLPs at a given rating level is because there are no alternative secured financing markets for MLPs as there are for most equity REITs. If the unsecured bond market is not an economical alternative, REITs may elect to access the CMBS market, insurance company or bank principal mortgage markets as sources of contingent liquidity.
Other notable contrasts between REITs and MLPs include distribution requirements and corporate governance practices.
Additional information is available in Fitch's 'Top 10 Comparisons of REITs and MLPs', which is available at 'www.fitchratings.com' or by clicking on the below link.
Link to Fitch Ratings' Report: Top 10 Comparisons of REITs and MLPs
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