Strong Balance Sheet Imperative to Weather COVID-19 Crisis
07/01/2020 | by Diane Rusignola

Jeff Horowitz, global head of real estate, gaming, and lodging investment banking at BofA Securities, participated in a video interview in conjunction with Nareit’s REITweek: Virtual Investor Conference (held June 2-4).

Horowitz said that some REITs will weather the coronavirus crisis, including data centers, labs, and tower and industrial companies, and other REITs may struggle. When the pandemic began, Horowitz and his team looked at the balance sheets of REITs. Given the low interest rate environment, most REITs took out most of their maturities, Horowitz said.

“Very few REITs have a maturity issue, which I think has been a very big difference from before,” he said. “Some will have a liquidity issue, based on the duration of this...a lot of leisure sectors, for example.”

The biggest lesson of the pandemic, Horowitz said, is that balance sheet strength matters.

“You have to have a balance sheet that’s prepared to run a business in various cycles. Certain sectors in particular, you have to keep your leverage very low,” he said.

Horowitz added that REITs must maintain strong relationships and communication with all of their constituencies, including tenants, employees, and bankers.

“The world was built for interaction. We wanted people to communicate with each other, we wanted global supply chains, and all of those things have been turned on their head right now,” he said, noting that REITs must make their investors and customers feel safe in this uncertain time.

Horowitz also said offices, retail assets, hotels, and restaurants need to rethink how their customers will interact, and that trends like influxes into cities may reverse as a result of the pandemic.

“How people are educated could be changing. How we communicate with each other could be changing. All of these things are going to impact, ultimately, the decisions people make for their real estate needs,” Horowitz said.