January 16, 2010

REITs: The Other Big Lenders

What Are They

When we think of credit or lenders we often think of banks, now that mortgage companies no longer exist, at least independently.

Its clear that banks may6 not be willing or in a strong position to lend money to buyers in a meaningful way. We often forget there is such a thing as private equity.

Private Equity

Simply but not entirely accurate, a Real Estate Investment Trust is a stock market vehicle much like a mutual fund. When you buy shares of REIT, you are buying a share of a real estate or mortgage portfolio, rather than a portfolio of stocks.

These industry behemoths have more than raised $40 billion dollars of new money in 2009 and so are in a better position to refinance as credit markets thaw. They will be a solid option for owners, as the banks still hold back until their balance sheets are stronger. They have little appetite for risk, especially real estate related risk.

The ability to access capital is a critical advantage in a market in which bank lending remains tight and the CMBS market still is essentially dysfunctional, said NAREIT President and CEO Steven A. Wechsler

The REITS are now cash heavy and have superior, specialized real estate management skills. In other words they are ready to refi property and to buy property in what will become a generational opportunity, as cash strapped owners and developers are forced to walk away from bad deals.

REIT Reality
A view from the stock market

Steve Sterrett, a REIT CEO notes: People are more comfortable with their business models and while the first half of 2010 will look a lot like 2009, the second half will be better. The chart speaks for itself. Professional investors are trying to look past the problem that commercial real estate is experiencing and are betting that cash heavy investors will benefit when owners that cant carry walk or sell at bargain basement prices.

REsourced from www.yourpropertypath.com
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