A-REITS facing billion dollar wave of write-downs as higher interest rates bite
Charter Hall, Abacus and Growthpoint are all in focus with the A-REIT sector set to update the market on the impact of higher interest rates when reporting season kicks off next week.
Australia's largest Real Estate Investment Trusts could be forced to slash the carrying values of properties on their books by billions of dollars from next week, as the combination of higher interest and a sluggish office sector crimp returns.
And some REITs may be forced into asset sales as higher borrowing costs and lower property values push leverage ratios into unsafe territory. These are some of the major themes analysts are watching as the A-REIT sector results kick off reporting season next week with Charter Hall, Region Group, BWP Trust and Mirvac all set to deliver results.
Suraj Nebhani, Vice President of Property and Infrastructure at Citi said REITs with high levels of leverage will be most impacted as interest rate hedges roll off, with increased borrowing costs hurting cap rates (the industry measure for yield, which takes rental income and asset value into account).
“The stocks which will be impacted by this are not surprisingly ones where the borrowing costs are much lower than the market cost of debt is at the moment,” Nebhani told Capital Brief in an interview.
