OREANDA-NEWS. Size and seasoning are more likely to support than restrain U.S. equity REIT ratings, though there are certain instances where a company's size can actually be a hindrance, according to a new Fitch Ratings report.

Fitch may view size as a positive rating attribute for larger REITs but does not reflexively consider it a credit negative for smaller REITs. In fact, smaller REITs can achieve investment-grade ratings to the extent that Fitch anticipates additional growth in unencumbered portfolios, improved credit metrics and enhanced access to unsecured debt capital. Conversely, a larger size does not always support higher ratings.

Larger REITs often have lower overhead burdens and unsecured borrowing costs. However, these savings do not always translate into stronger credit metrics for bondholders.

Fitch views access to capital as more important to REIT credits than cost of capital from a default probability perspective. Indeed, refinance risk, rather than interest payment default, is the principal risk to REIT credits given generally longer term leases to credit tenants against the backdrop of strict financial covenants in most REIT bond indentures.

Size could actually begin to work against larger REITs if they have a large amount of unsecured maturities that will need to be refinanced annually.

'The Role of Size and Seasoning in U.S. REIT Ratings', is available at 'www.fitchratings.com' or by clicking on the above link.