Retail REITs Excel on the Fundamental Side Due to High Quality of Assets and Retail Locations in Strong Markets: Steven R. Marks of Fitch Ratings Discusses the Best Performers in the REIT Sector

Wall Street Transcript

67 WALL STREET, New York - June 25, 2013 - The Wall Street Transcript has just published its REITs Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Acquisition and Financing Costs - Pricing Power Outlook - Residential and Commercial REITs - Inexpensive Access to Capital - Apartment, Lodging, Self-Storage and Office REITs

Companies include: Public Storage (PSA), Simon Property Group Inc. (SPG), Federal Realty Investment Trus (FRT), iStar Financial Inc. (SFI) and many more.

In the following excerpt from the REITs Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Of the companies whose debt you look at, which would you say are at the higher end of the rating scale today?

Mr. Marks: There are three companies that we do rate in the A category. One is Public Storage (PSA), and the A+ rating is driven primarily by the fact that the company uses little debt and funds itself almost exclusively with perpetual preferred stock, so the company faces minimal refinance risk and has extremely low leverage.

The other companies in the A category are Simon Property (SPG), which is the large global mall REIT, and Federal Realty Trust (FRT), both of which we rate at A-.

Simon and Federal are both in the retail space. Simon, being a large global company, has fantastic access to capital. Federal is in probably some of the best markets in the country in terms of being in Washington, D.C., and markets in California, and the company is low-levered, it has conservative management, they've maintained fantastic metrics, and the fundamentals really bear out the fact that they've been the best-performing company on the fundamental side over the last five years. A lot of that is due to the high quality of assets, infill retail locations in strong markets.

TWST: And who is at the low end of the rating scale?

Mr. Marks: The one company that we have in the single-B category is a mortgage REIT called iStar (SFI). The B- rating is due to the fact that the company's loan portfolio is of fairly low quality; the earnings power of the existing portfolio, the cash generation power, is fairly low right now, because the company has over the last three or four years foreclosed on a lot of properties and a lot of land, a lot of non-income-producing assets...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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