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Moody's - US REITs’ growing exposure to climate risk to require investments in resiliency

·23 mins read

<!DOCTYPE html> <html lang="" xml:lang=""> <head> <title>/nwsys/www/images/PBC_1243810</title> <meta http-equiv="Content-Type" content="text/html; charset=UTF-8"/> <meta name="generator" content="pdftohtml 0.36"/> <meta name="date" content="2020-09-02T08:35:18+00:00"/> <style type="text/css"> <!-- .xflip { -moz-transform: scaleX(-1); -webkit-transform: scaleX(-1); -o-transform: scaleX(-1); transform: scaleX(-1); filter: fliph; } .yflip { -moz-transform: scaleY(-1); -webkit-transform: scaleY(-1); -o-transform: scaleY(-1); transform: scaleY(-1); filter: flipv; } .xyflip { -moz-transform: scaleX(-1) scaleY(-1); -webkit-transform: scaleX(-1) scaleY(-1); -o-transform: scaleX(-1) scaleY(-1); transform: scaleX(-1) scaleY(-1); filter: fliph + flipv; } --> </style> </head> <body bgcolor="#A0A0A0" vlink="blue" link="blue"> <!-- Page 1 --> <style type="text/css"> <!-- p {margin: 0; padding: 0;} .ft00{font-size:18px;font-family:Times;color:#000000;} .ft01{font-size:18px;font-family:Times;color:#1257c7;} .ft02{font-size:13px;font-family:Times;color:#0d0c0c;} .ft03{font-size:13px;font-family:Times;color:#000000;} .ft04{font-size:13px;font-family:Times;color:#1b62b7;} .ft05{font-size:13px;line-height:30px;font-family:Times;color:#0d0c0c;} --> </style> <div id="page1-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1243810001.png" alt="background image"/> <p style="position:absolute;top:155px;left:108px;white-space:nowrap" class="ft00"><b>Research Announcement:&#160;</b></p> <p style="position:absolute;top:155px;left:364px;white-space:nowrap" class="ft01"><b>Moody's - US REITs’ growing exposure to</b></p> <p style="position:absolute;top:180px;left:108px;white-space:nowrap" class="ft01"><b>climate risk to require investments in resiliency</b></p> <p style="position:absolute;top:216px;left:108px;white-space:nowrap" class="ft02">New York, September 02, 2020 --</p> <p style="position:absolute;top:246px;left:108px;white-space:nowrap" class="ft03">»&#160;Operating margins are now generally stable, but sustained increases in utility, insurance and</p> <p style="position:absolute;top:266px;left:127px;white-space:nowrap" class="ft03">maintenance costs could weigh on profitability</p> <p style="position:absolute;top:296px;left:108px;white-space:nowrap" class="ft03">»&#160;Increasing weather-related risks warrant additional investments in resiliency and potentially also</p> <p style="position:absolute;top:316px;left:127px;white-space:nowrap" class="ft03">portfolio reconfiguration</p> <p style="position:absolute;top:351px;left:108px;white-space:nowrap" class="ft02">Moody’s-rated US REITs’ exposure to climate risk is currently manageable, but will increase over</p> <p style="position:absolute;top:371px;left:108px;white-space:nowrap" class="ft02">time, Moody’s Investors Service says in a new report. So far the REITs have not been materially</p> <p style="position:absolute;top:390px;left:108px;white-space:nowrap" class="ft02">affected by adverse weather trends, but as events such as hurricanes and floods become more</p> <p style="position:absolute;top:410px;left:108px;white-space:nowrap" class="ft05">frequent and extreme, REITs’ capital-intensive portfolios will become more vulnerable to the weather.<br/>“The climate trends most relevant to US REITs, including rising surface temperatures and water</p> <p style="position:absolute;top:460px;left:108px;white-space:nowrap" class="ft02">scarcity, are slow moving but definitive, and over the longer term could weaken landlords’ operating</p> <p style="position:absolute;top:479px;left:108px;white-space:nowrap" class="ft02">metrics and lease economics,” said Ranjini Venkatesan, a Moody’s VP-Senior Analyst. “Increasing</p> <p style="position:absolute;top:499px;left:108px;white-space:nowrap" class="ft02">weather-related risks warrant additional investments in resiliency, and potentially also portfolio</p> <p style="position:absolute;top:518px;left:108px;white-space:nowrap" class="ft05">reconfiguration.”<br/>While REITs’ operating margins are now generally stable, sustained increases in utility, insurance</p> <p style="position:absolute;top:568px;left:108px;white-space:nowrap" class="ft02">and maintenance costs will eventually weigh on profitability, Venkatesan says. While insurance has</p> <p style="position:absolute;top:587px;left:108px;white-space:nowrap" class="ft02">been an important risk mitigant for commercial real estate landlords over the past few years, long-</p> <p style="position:absolute;top:607px;left:108px;white-space:nowrap" class="ft02">term climate trends warrant larger capital investments, with REITs therefore investing in property-</p> <p style="position:absolute;top:626px;left:108px;white-space:nowrap" class="ft02">level resource efficiency projects and other enhancements to protect their assets from weather-</p> <p style="position:absolute;top:646px;left:108px;white-space:nowrap" class="ft05">related damage.<br/>Other factors that could influence a REITs’ credit metrics in the future include its portfolio mix,</p> <p style="position:absolute;top:696px;left:108px;white-space:nowrap" class="ft02">contractual terms and the health of its infrastructure, as well as local economic activity and the</p> <p style="position:absolute;top:715px;left:108px;white-space:nowrap" class="ft02">REIT’s exposure to the larger economy. Passing on increased costs to tenants and contractual terms</p> <p style="position:absolute;top:735px;left:108px;white-space:nowrap" class="ft02">that require tenants to fund capital improvements would reduce REITs’ expenses, while a vibrant</p> <p style="position:absolute;top:754px;left:108px;white-space:nowrap" class="ft05">local economy and government investment in infrastructure would also mitigate climate-related risks.<br/>While changes in temperature and precipitation patterns will affect the portfolios of most US REITs</p> <p style="position:absolute;top:804px;left:108px;white-space:nowrap" class="ft02">in the long run, the geographic distribution of a REIT’s assets will also be important, Moody’s says.</p> <p style="position:absolute;top:823px;left:108px;white-space:nowrap" class="ft02">Water and heat stress, for example, are the biggest risk factors for REITs with a large number of</p> <p style="position:absolute;top:843px;left:108px;white-space:nowrap" class="ft05">properties in metropolitan coastal markets in the Northeast and California.<br/>Subscribers can access this report, “Real Estate – US: REITs can manage climate</p> <p style="position:absolute;top:893px;left:108px;white-space:nowrap" class="ft02">risk, investments needed to address growing challenges,” at:&#160;</p> <p style="position:absolute;top:893px;left:535px;white-space:nowrap" class="ft04">http://www.moodys.com/</p> <p style="position:absolute;top:912px;left:108px;white-space:nowrap" class="ft04">researchdocumentcontentpage.aspx?docid=PBC_1241891.</p> <p style="position:absolute;top:943px;left:108px;white-space:nowrap" class="ft02">NOTE TO JOURNALISTS ONLY: For more information, please call one of our global</p> <p style="position:absolute;top:962px;left:108px;white-space:nowrap" class="ft02">press information hotlines: New York <PhoneNo>+1-212-553-0376</PhoneNo>, London <PhoneNo>+44-20-7772-5456</PhoneNo>, Tokyo</p> <p style="position:absolute;top:982px;left:108px;white-space:nowrap" class="ft02"><PhoneNo>+813-5408-4110</PhoneNo>, Hong Kong <PhoneNo>+852-3758-1350</PhoneNo>, Sydney <PhoneNo>+61-2-9270-8141</PhoneNo>, Mexico City</p> <p style="position:absolute;top:1001px;left:108px;white-space:nowrap" class="ft02"><PhoneNo>001-888-779-5833</PhoneNo>, São Paulo <PhoneNo>0800-891-2518</PhoneNo>, or Buenos Aires <PhoneNo>0800-666-3506</PhoneNo>. You can also email</p> <p style="position:absolute;top:1021px;left:108px;white-space:nowrap" class="ft02">us at mediarelations@moodys.com or visit our web site at www.moodys.com.</p> </div> <!-- Page 2 --> <style type="text/css"> <!-- p {margin: 0; padding: 0;} .ft06{font-size:13px;line-height:23px;font-family:Times;color:#0d0c0c;} --> </style> <div id="page2-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1243810002.png" alt="background image"/> <p style="position:absolute;top:114px;left:108px;white-space:nowrap" class="ft02">This publication does not announce a credit rating action. For any credit ratings referenced in this</p> <p style="position:absolute;top:133px;left:108px;white-space:nowrap" class="ft02">publication, please see the ratings tab on the issuer/entity page on&#160;</p> <p style="position:absolute;top:133px;left:574px;white-space:nowrap" class="ft04">www.moodys.com</p> <p style="position:absolute;top:133px;left:701px;white-space:nowrap" class="ft02">&#160;for the most</p> <p style="position:absolute;top:153px;left:108px;white-space:nowrap" class="ft05">updated credit rating action information and rating history.<br/>Ranjini Venkatesan</p> <p style="position:absolute;top:202px;left:108px;white-space:nowrap" class="ft02">VP-Senior Analyst</p> <p style="position:absolute;top:222px;left:108px;white-space:nowrap" class="ft02">Corporate Finance Group</p> <p style="position:absolute;top:241px;left:108px;white-space:nowrap" class="ft02">Moody's Investors Service, Inc.</p> <p style="position:absolute;top:261px;left:108px;white-space:nowrap" class="ft02">JOURNALISTS: 1 <PhoneNo>212 553 0376</PhoneNo></p> <p style="position:absolute;top:280px;left:108px;white-space:nowrap" class="ft05">Client Service: 1 <PhoneNo>212 553 1653</PhoneNo><br/>Philip Kibel</p> <p style="position:absolute;top:330px;left:108px;white-space:nowrap" class="ft02">Associate Managing Director</p> <p style="position:absolute;top:350px;left:108px;white-space:nowrap" class="ft02">Corporate Finance Group</p> <p style="position:absolute;top:369px;left:108px;white-space:nowrap" class="ft02">Moody's Investors Service, Inc.</p> <p style="position:absolute;top:389px;left:108px;white-space:nowrap" class="ft02">JOURNALISTS: 1 <PhoneNo>212 553 0376</PhoneNo></p> <p style="position:absolute;top:408px;left:108px;white-space:nowrap" class="ft05">Client Service: 1 <PhoneNo>212 553 1653</PhoneNo><br/>Releasing Office:</p> <p style="position:absolute;top:458px;left:108px;white-space:nowrap" class="ft02">Moody's Investors Service, Inc.</p> <p style="position:absolute;top:477px;left:108px;white-space:nowrap" class="ft02">250 Greenwich Street</p> <p style="position:absolute;top:497px;left:108px;white-space:nowrap" class="ft02">New York, NY 10007</p> <p style="position:absolute;top:516px;left:108px;white-space:nowrap" class="ft02">U.S.A.</p> <p style="position:absolute;top:536px;left:108px;white-space:nowrap" class="ft02">JOURNALISTS: 1 <PhoneNo>212 553 0376</PhoneNo></p> <p style="position:absolute;top:555px;left:108px;white-space:nowrap" class="ft02">Client Service: 1 <PhoneNo>212 553 1653</PhoneNo></p> <p style="position:absolute;top:645px;left:108px;white-space:nowrap" class="ft02">© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their</p> <p style="position:absolute;top:664px;left:108px;white-space:nowrap" class="ft06">licensors and affiliates (collectively, “MOODY’S”). 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However, MOODY’S is not an auditor and cannot</p> <p style="position:absolute;top:709px;left:108px;white-space:nowrap" class="ft02">in every instance independently verify or validate information received in the rating process or in</p> <p style="position:absolute;top:729px;left:108px;white-space:nowrap" class="ft06">preparing its Publications.<br/>To the extent permitted by law, MOODY’S and its directors, officers, employees, agents,</p> <p style="position:absolute;top:771px;left:108px;white-space:nowrap" class="ft02">representatives, licensors and suppliers disclaim liability to any person or entity for any indirect,</p> <p style="position:absolute;top:791px;left:108px;white-space:nowrap" class="ft02">special, consequential, or incidental losses or damages whatsoever arising from or in connection</p> <p style="position:absolute;top:810px;left:108px;white-space:nowrap" class="ft02">with the information contained herein or the use of or inability to use any such information, even if</p> <p style="position:absolute;top:830px;left:108px;white-space:nowrap" class="ft02">MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers</p> <p style="position:absolute;top:849px;left:108px;white-space:nowrap" class="ft02">is advised in advance of the possibility of such losses or damages, including but not limited to:</p> <p style="position:absolute;top:869px;left:108px;white-space:nowrap" class="ft02">(a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant</p> <p style="position:absolute;top:888px;left:108px;white-space:nowrap" class="ft06">financial instrument is not the subject of a particular credit rating assigned by MOODY’S.<br/>To the extent permitted by law, MOODY’S and its directors, officers, employees, agents,</p> <p style="position:absolute;top:931px;left:108px;white-space:nowrap" class="ft02">representatives, licensors and suppliers disclaim liability for any direct or compensatory losses</p> <p style="position:absolute;top:950px;left:108px;white-space:nowrap" class="ft02">or damages caused to any person or entity, including but not limited to by any negligence (but</p> <p style="position:absolute;top:970px;left:108px;white-space:nowrap" class="ft02">excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt,</p> <p style="position:absolute;top:989px;left:108px;white-space:nowrap" class="ft02">by law cannot be excluded) on the part of, or any contingency within or beyond the control of,</p> <p style="position:absolute;top:1009px;left:108px;white-space:nowrap" class="ft02">MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers,</p> <p style="position:absolute;top:1028px;left:108px;white-space:nowrap" class="ft02">arising from or in connection with the information contained herein or the use of or inability to use</p> <p style="position:absolute;top:1048px;left:108px;white-space:nowrap" class="ft02">any such information.</p> </div> <!-- Page 4 --> <style type="text/css"> <!-- p {margin: 0; padding: 0;}--> </style> <div id="page4-div" style="position:relative;width:918px;height:1188px;"> <img width="918" height="1188" src="http://mco.acquiremedia.com/images/PBC_1243810004.png" alt="background image"/> <p style="position:absolute;top:114px;left:108px;white-space:nowrap" class="ft02">NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS,</p> <p style="position:absolute;top:133px;left:108px;white-space:nowrap" class="ft02">COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF</p> <p style="position:absolute;top:153px;left:108px;white-space:nowrap" class="ft02">ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE</p> <p style="position:absolute;top:172px;left:108px;white-space:nowrap" class="ft06">BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.<br/>Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s</p> <p style="position:absolute;top:215px;left:108px;white-space:nowrap" class="ft02">Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and</p> <p style="position:absolute;top:234px;left:108px;white-space:nowrap" class="ft02">municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s</p> <p style="position:absolute;top:254px;left:108px;white-space:nowrap" class="ft02">Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s</p> <p style="position:absolute;top:273px;left:108px;white-space:nowrap" class="ft02">Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from</p> <p style="position:absolute;top:293px;left:108px;white-space:nowrap" class="ft02">$1,000 to approximately $2,700,000. MCO and Moody’s Investors Service also maintain policies</p> <p style="position:absolute;top:312px;left:108px;white-space:nowrap" class="ft02">and procedures to address the independence of Moody’s Investors Service credit ratings and credit</p> <p style="position:absolute;top:332px;left:108px;white-space:nowrap" class="ft02">rating processes. Information regarding certain affiliations that may exist between directors of MCO</p> <p style="position:absolute;top:351px;left:108px;white-space:nowrap" class="ft02">and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and</p> <p style="position:absolute;top:371px;left:108px;white-space:nowrap" class="ft02">have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted</p> <p style="position:absolute;top:390px;left:108px;white-space:nowrap" class="ft02">annually at&#160;</p> <p style="position:absolute;top:390px;left:188px;white-space:nowrap" class="ft04">www.moodys.com</p> <p style="position:absolute;top:390px;left:315px;white-space:nowrap" class="ft02">&#160;under the heading “Investor Relations — Corporate Governance —</p> <p style="position:absolute;top:410px;left:108px;white-space:nowrap" class="ft06">Director and Shareholder Affiliation Policy.”<br/>Additional terms for Australia only: Any publication into Australia of this document is pursuant to the</p> <p style="position:absolute;top:452px;left:108px;white-space:nowrap" class="ft02">Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited</p> <p style="position:absolute;top:472px;left:108px;white-space:nowrap" class="ft02">ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136</p> <p style="position:absolute;top:491px;left:108px;white-space:nowrap" class="ft02">972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale</p> <p style="position:absolute;top:511px;left:108px;white-space:nowrap" class="ft02">clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access</p> <p style="position:absolute;top:530px;left:108px;white-space:nowrap" class="ft02">this document from within Australia, you represent to MOODY’S that you are, or are accessing</p> <p style="position:absolute;top:550px;left:108px;white-space:nowrap" class="ft02">the document as a representative of, a “wholesale client” and that neither you nor the entity you</p> <p style="position:absolute;top:569px;left:108px;white-space:nowrap" class="ft02">represent will directly or indirectly disseminate this document or its contents to “retail clients” within</p> <p style="position:absolute;top:589px;left:108px;white-space:nowrap" class="ft02">the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as</p> <p style="position:absolute;top:608px;left:108px;white-space:nowrap" class="ft02">to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or</p> <p style="position:absolute;top:628px;left:108px;white-space:nowrap" class="ft06">any form of security that is available to retail investors.<br/>Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency</p> <p style="position:absolute;top:670px;left:108px;white-space:nowrap" class="ft02">subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc.,</p> <p style="position:absolute;top:690px;left:108px;white-space:nowrap" class="ft02">a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating</p> <p style="position:absolute;top:709px;left:108px;white-space:nowrap" class="ft02">agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization</p> <p style="position:absolute;top:729px;left:108px;white-space:nowrap" class="ft02">(“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-</p> <p style="position:absolute;top:748px;left:108px;white-space:nowrap" class="ft02">NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated</p> <p style="position:absolute;top:768px;left:108px;white-space:nowrap" class="ft02">obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit</p> <p style="position:absolute;top:787px;left:108px;white-space:nowrap" class="ft02">rating agencies registered with the Japan Financial Services Agency and their registration numbers</p> <p style="position:absolute;top:807px;left:108px;white-space:nowrap" class="ft06">are FSA Commissioner (Ratings) No. 2 and 3 respectively.<br/>MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including</p> <p style="position:absolute;top:849px;left:108px;white-space:nowrap" class="ft02">corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated</p> <p style="position:absolute;top:869px;left:108px;white-space:nowrap" class="ft02">by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to</p> <p style="position:absolute;top:888px;left:108px;white-space:nowrap" class="ft02">MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging</p> <p style="position:absolute;top:908px;left:108px;white-space:nowrap" class="ft06">from JPY125,000 to approximately JPY250,000,000.<br/>MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory</p> <p style="position:absolute;top:950px;left:108px;white-space:nowrap" class="ft02">requirements.</p> </div> </body> </html>