OREANDA-NEWS. Following a difficult few months, U. S. equity REIT liquidity profiles have improved meaningfully year-over-year thanks to a lessons learned approach from previous down cycles, according to Fitch Ratings in its latest quarterly update.

Despite current favorable capital market conditions, REITs are still preparing for the eventual market contraction, according to Managing Director Steven Marks. 'REITs are adopting a lessons learned approach by bolstering cash reserves, reducing revolving line of credit balances and consciously spacing out debt maturity schedules to prevent any near-term shocks,' said Marks.

Early 2016 capital issuance was sluggish but has since recovered on the back of strong unsecured bond and common equity issuance since April 1. The median liquidity coverage ratio for select U. S. equity REITs is 1.7x for the July 1, 2016 - Dec. 31, 2018 period as coverage for each major property type increased 20% or more from the prior year.

Equity investors are also realigning their portfolios with REITs now officially reclassified into a new real estate-only sector under the Global Industry Classification Standard (GICS), which went into effect at the end of last month. The change removes REITs from the Financial Institutions sector, thereby increasing visibility and likely generalist investment in the sector as commercial real estate becomes a growing part of a diversified investment portfolio.