S&P Turns Bullish on REIT's; Justification for CRE Upgrades?

In what appears to be a thinly veiled justification for recent ratings vacillations on commercial mortgage debt, S&P has just released an uber-bullish opinion of REIT's - specifically those that have accumulated large shopping center portfolios. The Mcgraw-Hill (MHP) subsidiary cites, among other supposedly positive factors, the "diversification" of REIT's tenants and locales as a reason to plow your money into the stocks of these Trusts. S&P identifies this positive aspect as being contrary to the experience of developers who, according to S&P, tend to own/operate single tenant locations; the implication being one of having "all your eggs in one basket". The most bizarre comment though, was that "local opposition" to developers seeking approval for new retail centers would benefit these REIT's by preventing neighboring competition. Such a statement caused us to wonder who, exactly, is charging ahead with plans to build new shopping centers right now? And where would the funding come from, especially for these "small developers" that S&P is speaking of.

That this note lacks of any sound reasoning or logic is not surprising. Most likely, S&P is painfully aware of the criticism it has received for it's sudden about face on commercial mortgage debt; specifically the fact that they are choosing to upgrade these securities to AAA status - for no apparent reason, and actually in defiance of what every fundamental indicator is telling the world at present. We wouldn't be surprised to see S&P pepper the world with more bullish CRE opinions in the near future, as they struggle oh so desperately to justify the non-sensible - and likely politically strong-armed - re-labeling of struggling debt to AAA. Sphere: Related Content