REIT Capital Markets Turning Vibrant

Merrie Frankel, vice president and senior credit officer with Moody's Investors Service, spoke with REIT.com during REITWeek 2011: NAREIT's Investor Forum about the real estate capital markets. She said the markets have certainly improved over the past 12 to 18 months, but that there is still more room to recover.

"I think what this recession has shown us is that the REIT model works and that the access to the four quadrants of public/private debt/equity is extremely helpful," she said. "Back in April 2008 public REITs were the first to come back to the market, and you have had good issuance since then. It really has been somewhat of a vibrant market."

Frankel said that every quarter, REIT metrics and balance sheets continue to show improvement, and that has led Moody's and other agencies to give some companies upgrades and positive outlooks.

Within the market, Frankel said there continues to be a bifurcation among quality of assets and, in fact, it seems to be getting more pronounced among the A properties and the B and C assets. She said there have been recent announcements from companies that they were planning to sell some Class-B, or non-core assets, and it will be interesting to see who buys them.

"Sometimes what may be your B may be another company's A, or it is a different type of investor," she said. In addition, she said in the CMBS market the properties that are getting financed are not the Class-A properties but the "plain vanilla, income in place" assets. She said about 65 percent of the CMBS deals have been in retail.

October 2011 marks the 10th anniversary of Standard & Poor's opening its index doors to REITs. This decision has had a dramatic impact on the REIT investment proposition, Frankel said.

"It has allowed the larger REITs that were brought into the S&P to have access to investors that might not have known or invested in them before," she said. "It has also given more visibility to the REIT business."

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REIT Capital Markets Turning Vibrant

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