RPT-Correction - Fitch: EMEA real estate issuers insulated from rising rates
Dec 16 (Reuters) - (The following statement was released by the rating agency)
This announcement replaces the version published on 13 December 2013 in correction of SEGRO's rating. The rating should be 'BBB+', and not 'BBB' as previously stated. The correct version is as follows: Fitch Ratings says EMEA real estate issuers will benefit from well-hedged, low debt funding costs and inflation-linked rental income, which will underpin cash-flow generation for 2014 and 2015. The portfolio includes British Land (BBB+/Stable), Hammerson (BBB+/Stable) and SEGRO (BBB+/Stable).
In a report published today, Fitch says rated real estate issuers are well insulated from the risks of faster-than-expected tightening in interest rates and emergence of property bubbles in some prime markets. Average hedged debt profiles of around six years should limit any impact from increasing debt funding costs on cash flow and balance sheets are stronger going into 2014, allowing for moderate declines in capital value.
Fitch expects real estate issuers to turn to the corporate bond market to refinance bank debt as new issuers look to lock in low interest rates and the longer maturities on offer and as European banks aggressively de-lever from their property exposures.
Expected improvement in real estate markets is likely to be geographically uneven with capital values and rental growth in the UK outperforming those in continental Europe. However, increased investment activity in peripheral Europe and secondary quality property assets could increase in 2014 as investors move into higher-yielding assets.
Unrated corporate issuers dependent on secured bank funding are likely to use the unsecured bond market in 2014. This offers advantages of covenant flexibility, release of encumbered assets and cost arbitrage. However, this transition to unsecured funding could be challenging if new unsecured bondholders are subject to subordination risks.
For a detailed assessment of the outlook for property and real estate issuers across EMEA markets, see "2014 Outlook: EMEA Property and Real Estate" published today at www.fitchratings.com
Link to Fitch Ratings' Report: 2014 Outlook: EMEA Property and Real Estate
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