Fitch Initiates Coverage of New Plan Excel Realty Trust at 'BBB+'

Business Wire, July 12, 2004

NEW YORK -- Fitch Ratings has initiated coverage of New Plan Excel Realty Trust, Inc. (NYSE: NXL) by assigning a 'BBB+' rating to the outstanding $1.050 billion of senior unsecured notes, as well as a 'BBB' rating to the company's Series D & E Preferred Stock. The Rating Outlook is Stable.

Fitch's ratings of New Plan Excel Realty Trust, Inc. (New Plan) reflect a well-diversified portfolio of necessity-based retail shopping centers, the stable earnings generated by these centers and the company's strong unencumbered net operating income (NOI) coverage of total unsecured interest expense of 3.6 times (x). New Plan's strategy of acquiring and retaining stabilized assets minimizes exposure to development risk, reduces leasing risk and capitalizes on the recurring earnings generated by seasoned assets. Fitch also acknowledges the experience and capability of New Plan's senior and regional management teams.

Fitch's 'BBB+' rating recognizes the enhancement that New Plan's portfolio has experienced over the past four years since the redevelopment program was initiated in November 2000. Fitch expects this enhancement program to continue and management has indicated a current development pipeline of $130.2 million to be deployed during 2004 and 2005. In 2003, New Plan completed $34 million of redevelopment in the portfolio. An additional factor supporting Fitch's 'BBB+' rating is the strengthening of New Plan's overall interest coverage ratios, as well as its fixed charge ratio over the past four years.

New Plan's earnings before interest, taxes, depreciation and amortization (EBITDA) coverage of total interest expense (which includes capitalized interest) improved to 3.0x in 2003 from 2.6x in 2001. Fitch will continue to monitor the status and results of New Plan's redevelopment plan along with the improvement of the company's credit statistics, which together will be some of the key determinants in the ratings of New Plan. Additionally, New Plan's ongoing commitment to the unsecured market and the maintenance of the unencumbered pool is another key ratings consideration. Currently, 72% of New Plan's portfolio is unencumbered.

Fitch's credit concerns regarding New Plan include the total leverage of the company and the highly competitive nature of retail. First, New Plan is currently operating with relatively high total book leverage (total debt plus preferred to undepreciated book capital) for the rating category at 55.2%. The average ratio for New Plan's peer group is 52.8%. Second, Fitch is concerned with the highly competitive nature of leasing retail space, and the competitive landscape for the grocery industry. Landlords must have a number of options for tenants within their portfolios if they plan to maintain access to tenants, who are rolling out new stores and concepts with either a national program (e.g. Bed Bath and Beyond, one of the TJX brands or Blockbuster Video) or are a regional approach (e.g. Dunham's Sports). In addition, the retail real estate investment trusts (REITs) must also deal with competition among the retailers themselves, their expansion or contraction plans and the ever present threat of the 'Wal-Mart effect'.

Fitch toured New Plan's assets in Michigan, Houston, North Carolina and northern and central Florida. These assets contributed over 25% of total unencumbered NOI for year ending Dec. 31, 2003. On the whole, the assets were well-located, well-leased and well-maintained. Generally, the observed assets can be described as necessity-based neighborhood and community shopping centers with strong surrounding population characteristics. In general, the centers were situated on well-traveled, retail thoroughfares. The assets had good visibility and access, though significant competitive product existed in many markets. Despite the competition, Fitch observed that several tenants in the New Plan portfolio complemented rather than competed with nearby retailers. The regional management and leasing teams have a measured approach to tenanting the New Plan shopping centers to serve the surrounding area demographics (i.e. putting an ethnic grocer in as anchor to serve an area with strong ethnic demographics).

New Plan exhibits solid tenant diversity, which contributes to the stability of earnings generated by the company's portfolio, with the top ten tenants contributing 20.4% of annual base rent (ABR) as of March 31, 2004. Of the top five tenants, three are investment-grade rated and contribute 9.3% of total base rents. New Plan's largest tenant, The Kroger Co., represents 4% of annual base rents and is rated 'BBB' by Fitch. Rounding out the top five are Wal-Mart Stores, New Plan's second-largest tenant at 3.5% of base rents and rated 'AA' by Fitch, Kmart Corporation (2.7% of annual base rent), Ahold USA (2.2%) and The TJX Companies (1.8%). No other single tenant accounts for more than 1.3% of ABR with four of the number six through ten tenants on the roster being grocers including Publix and Safeway.