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2000•Journal of Real Estate Portfolio ManagementRequires access

An Investigation of Current Debt Levels of Equity REITs

Pete H. Oppenheimer

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Abstract

Executive Summary. This study investigates the current debt levels of equity real estate investment trusts (EREITs) and the ability of these companies to meet their interest and dividend payments. Critical financial ratios for the aggregate industry show that EREIT debt levels have consistently fallen since the recession of the early 1990s. In addition, lower debt levels and improved cash flows have reduced the risk of default as indicated by increasing debt coverage levels. However, this trend significantly reversed in 1998 when the industry experienced sharp increases in debt and reductions in interest coverage ratios.

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Executive Summary. This study investigates the current debt levels of equity real estate investment trusts (EREITs) and the ability of these companies to meet their interest and dividend payments. Critical financial ratios for the aggregate industry show that EREIT debt levels have consistently fallen since the recession of the early 1990s. In addition, lower debt levels and improved cash flows have reduced the risk of default as indicated by increasing debt coverage levels. However, this trend significantly reversed in 1998 when the industry experienced sharp increases in debt and reductions in interest coverage ratios.

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Available abstract

Executive Summary. This study investigates the current debt levels of equity real estate investment trusts (EREITs) and the ability of these companies to meet their interest and dividend payments. Critical financial ratios for the aggregate industry show that EREIT debt levels have consistently fallen since the recession of the early 1990s. In addition, lower debt levels and improved cash flows have reduced the risk of default as indicated by increasing debt coverage levels. However, this trend significantly reversed in 1998 when the industry experienced sharp increases in debt and reductions in interest coverage ratios.

Key concepts: Real estate investment trust, Executive summary, Equity (law), Business, Debt, Economics, Financial system, Monetary economics

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