Rising Rates May Hamper REITs' Borrowing

NEW YORK CITY-Although REITs increased their unsecured bank borrowing capacity more frequently and at more attractive terms over the past two years, the specter of rising interest rates may call their ability to continue doing so into question, Fitch Ratings says in a new report. As it is, REITs’ unsecured lines of credit are about 49% larger than they were in 2011, and are being obtained at lower borrowing rates; yet Fitch doesn’t see this downward trend as sustainable.

“The interest rate environment will be challenging and rating actions could be predicated on a REIT’s ability to address an increase in interest rates,” says Steven Marks, managing director and group head of US REITs at the New York City-based ratings agency.  Steven Marks. “The prospect of rising rates and how it affects unsecured lines of credit and pricing also bears close watch.”