Analysing REITS

[Qiaofeng]

Interesting report by CIMB (with special focus on their leverage and risks),

http://www.remisiers.org/cms_images/rese....11_OW.pdf

I dowloaded a copy and upload below as the reports at remisiers.org are removed after a couple of weeks,

Cheers all...

Most important part of the report is 2.2 on Banks' covenants.
Looks clear.

On Sponsors
Among qualitative considerations, the financial strength of sponsors is one of the most important, and pivotal in deciding banks covenants with the respective REITs. Recent announcements from a number of REITS after their 3Q results show that almost all the REITs under our coverage would need to repay more than 50% of their loans if their sponsors cease to own the REIT managers, and/or cease to be significant shareholders of the REIT units. Interestingly, AREIT has the lowest portion of loans at risk at only 10%.

On Covenants
We did not find any particularly demanding conditions. Generic conditions include adhering to the 60% asset leverage limit, and maintaining interest cover ratios at 1.5-2x, and LTV ratios of 60-80% for secured bank loans. None of the REITs is anywhere near breaching these covenants with their key metrics well covered beyond what is required by debt covenants.