(The following statement was released by the rating agency)
Link to Fitch Ratings' Report: Are REIT Share Buybacks Looming?
NEW YORK, April 29 (Fitch) Share buybacks are becoming more
appealing for U.S.
equity REITs, though they come with additional risks over time
according to Fitch Ratings in a new report.
REIT stocks outperformed broader indices during this past
quarter. That said,
trading levels are generally below net asset value, making share
intriguing use of capital, a trend that Fitch views negatively
Director Reinor Bazarewski,.
'Share repurchases may be a plus for REIT net asset values in
but over time the resultant increase in leverage could impair
said Bazarewski. 'It is important to note that current REIT
leverage is above
levels seen at the end of 2006, just before share buybacks
spiked sharply during
the last credit cycle.'
The REIT structure restricts share buybacks given the limited
ability for REITs
to retain cash flows. Fitch expects these structural
considerations to limit
large stock repurchases over the longer term. Optimistically,
economic downturn and subsequent dilution via en masse
deleveraging may also
have permanently changed the mindsets of REIT managements to
fiscal responsibility,' said Bazarewski.
'REIT Share Buybacks More Palatable: How Long do Memories Last?'
is available at
'www.fitchratings.com' or by clicking on the above link.
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY
Managing Director, Head of U.S. REITs
Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278,
Additional information is available at 'www.fitchratings.com'.
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