Fitch Analyst Says Stock Buybacks at Low Level Among REITs

Steven Marks, managing director with Fitch Ratings, joined REIT.com for a video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.

Marks has been monitoring REITs’ stock buybacks in the second half of the year, and he noted that activity has been limited. He attributed the lack of buybacks to the performance of REIT stocks in 2014, as most are trading at prices about their net asset values (NAV).

“Thus, [the stocks] are less economic from a buyback standpoint; they’re not as accretive,” Marks said.

Steven Marks

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Fitch: REIT Share Buybacks Could Impair Credit Quality

As share buybacks are becoming more appealing for equity REITs, ratings firm Fitch Ratings is warning that they pose risks to the companies’ credit ratings.

Despite outperforming the broader market in the first quarter, shares of equity REITs in general continue to trade below net asset value (NAV), making share buybacks “an intriguing use of capital,” according to a report released by Fitch on April 29. As of the end of 2013, REITs traded at a 7.2 percent discount to NAV. In the previous year, pricing was essentially in line with NAV, according to Fitch.

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