3/5/2010 | By Allen Kenney
Market trends suggest that the commercial real estate market has weathered the worst of the financial storm that has gripped the industry since the fall of 2008, according to SNL Financial LC Senior Industry Analyst, Real Estate, Jason Lail.
REITs raised more than $23 billion through secondary equity offerings last year in an effort to shore up balance sheets and address the credit crunch. However, Lail says that wave may have run its course.
"More equity offerings are certainly not out of the question, but the debt markets have opened up for the great majority of REITs—the exceptions being those companies with excessively high leverage ratios," he says.
If REITs do continue to tap the equity markets, their motives may be driven more by opportunity than survival. "More equity offerings are certainly not out of the question, especially if there are assets or even companies available for acquisition at decent pricing in 2010," Lail says.
Lail also notes that companies are reverting to previous dividend policies, another hopeful sign for REITs' capital positions. As a way to conserve cash, a number of REITs had taken advantage of an IRS decision in 2009 to allow them to pay a portion of their dividends in stock.
"We are also seeing more REITs reverting to all cash dividends, so the worst of the liquidity crunch appears to be over," Lail says.
(CLICK HERE to view some of the latest data from SNL on the REIT market, including information on total returns by sector, dividend yields, price-to-FFO multiples and equity offerings.)