not get squeezed when they do, as they will, even more than now...
Commercial RE problems are obvious, simply look at AZ strip malls.
And, look at the small bank FDIC takeovers...
almost all are now bcuz of commercial losses.
What this article tells U.S. is that REIT's are also very dependent on RE mortgages.
Last year, they brought in new investors to cover their losses.
This year they will either need a lot MORE new investors...
or their bank/lenders will have to "kick the can down the road"...
We WILL see this play out over the next 18+ months = the end of 2011.
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JGBellHimself 46 seconds ago
While this is a very good explanitory article, there are two things not fully explained:
First, over the last two years, from about July 08, many if not most REITs were unable to borrow anything, let alone, enough, to cover their declining income and RE losses. Not being able to borrow, what they did was issue new units - and that diluted their ownership, both those already in and those now buying in. To payout the same amount per unit is now much more expensive.
Second, what was not mentioned here, but is often elsewhere, are the staggering number of commercial 5yr to 10yr RE mortages held by REITs that MUST be re-financed over the next 18 months. This is said to be over 75% of ALL of the commercial RE loans. What we NEED to know is how many of those mandatory refi's are held by REITs. Bcuz, IF they cannot find any new replacement financing, and as of now they cannot, they will either have to get their lender/bank to "kick the can" forward, or forfeit their equity interests, OR sell more unit/shares!
The Bad News is that their lender/banks NEED to extricate their invested funds, to cover their other losses. The Good News is that their lender/banks do NOT what to foreclose on them, and have to show THAT loss on their balance sheets. And, of course, they do not WANT to "own" & have to run the property. Not a pretty picture.
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REIT Gains Mask Trouble Commercial Landlords Face
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