Most Asia-Pacific REITS can absorb gradual rises
A sudden and sharp rise in interest rates could shake some Asia-Pacific REITs, according to a scenario analysis conducted by S&P Global Ratings, titled, "When the cycle turns: Asia-Pacific REITs build a rating buffer as interest rates rise."
"We believe that most Asia-Pacific REITs can absorb a gradual increase in rates, given their robust interest coverage metrics, limited amount of floating-rate debt, and modest upcoming maturities," said S&P Global Ratings credit analyst Craig Parker."However, under severe stress scenarios of an interest rate jump of 200 basis points (bps) and 300 bps, a small number of entities that have an overweight exposure to floating interest rates would face ratings pressure.
"Asia-Pacific REITs' prudent financial stance has built a buffer for the ratings to withstand debt-funded growth and economic shocks.The notional average rating is 'A-' for the 58 rated REITs in the major Asia-Pacific real estate markets of Australia, China, Hong Kong, Japan, and Singapore.
