"We believe that ongoing concerns in the financing markets and current balance sheet positions mean that our real estate companies are likely to face headwinds, not storms, in terms of the availability of additional debt and borrowing costs," Goldman analyst Julian Livingston-Booth told clients in a research note.
While headline debt ratios across the sector appear weak for this stage in the cycle, but there are enough mitigating factors to suggest limited risk of covenant breaches even if economies suffer a hard landing, he argued. Instead, the Goldman analyst was concerned that real estate companies lack the firepower to take advantage of any potential opportunities to buy at distressed prices, and instead will face years of borrowing costs edging higher.
