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Share Buybacks Pose Risks for REITs

NEW YORK CITY—“It's important to note that current REIT leverage is above levels seen at the end of 2006,” says Reinor Bazarewski at Fitch Ratings.

By Paul Bubny | Updated on April 29, 2014

NEW YORK CITY—More share buybacks are in the offing for US REITs, Fitch Ratings said Tuesday. However, although stock repurchases may look appealing to REITs, the ratings agency is taking a negative view of such buybacks.

“Share repurchases may be a plus for REIT net asset values in the short-term, but over time the resultant increase in leverage could impair credit quality,’ says Reinor Bazarewski, a director with Fitch. “It’s 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.”

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