A new method of calculating leverage adopted by Fitch Ratings could expose REITs carrying high debt loads to the possibility of downgrades. In the past, Fitch primarily has looked at total debt to total market capitalization and total debt to undepreciated book capitalization. But the ratings agency said in a report those measures might understate leverage by overstating real estate asset values. Fitch said it believes looking at the ratio of net debt to recurring EBITDA provides a more meaningful picture of leverage. In the future, Fitch will view a rising trend of debt to EBITDA as a sign of deteriorating creditworthiness, the company said.

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