Asia Pacific real estate investment trusts (Reits) are in a good position to survive the tough challenges ahead, according to Standard & Poor’s (S&P).
With diversified funding sources and sound balance sheets, the global ratings agency believes that Reits in the region have become tougher from lessons learned from the past global financial crisis.
Trickle-down effects, however, are expected to arise from Euro Zone contagion fears, affecting the sector’s performance on the whole.
Remarkably, the widening real estate credit default spreads (CDS) are becoming more evident, as banks and other financial institutions make efforts to cover their bases by forking out more to insure their debt financing.
With stricter bank regulations under Basel III, debt financing costs for Reits are expected to rise as banks’ interest charges are tuned up.
Hence, S&P believes that overall absolute financing rates will remain at attractive levels.
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