11/12/2009 | By Matthew Bechard
By Matthew Bechard
Michael Zietsman, managing director at Jones Lang LaSalle, said REITs, in general, have done an excellent job of tapping into the public equity and debt markets but that most REITs still have more room to go before their balance sheets are completely healthy.
"REITs raised far more capital than most market observers had anticipated and they were able to attract interest from beyond the traditional REIT equity investors," Zietsman said. "Some REITs went too soon, but they got the ball rolling and the market rewarded them for taking action. Other REITs focused initially on raising capital through joint ventures and other avenues and then tapped the public markets, like Macerich."
As for where the additional capital will come from, Zietsman said that in addition to equity the debt markets are much more favorable today than a year ago. In addition, some capital needed to further pay down upcoming debt maturities will be coming from offshore investors, some of it from high-net worth investors and some of it will have to be written off or converted into equity, Zietsman said.
Zietsman said if an arbitrage remains between private market and public market pricing then we will see a significant amount of additional IPOs. "Every sector will jump on the bandwagon if the opportunity is there.," Zietsman said.
Going forward, Zietsman said he expects the industry re-learned a valuable lesson during the "Great recession." "Leverage will kill you if it's too high or if it is not sufficiently long term," Zietsman said. "Real estate is generally a low-liquidity asset that should be held with a long-term view. It should be financed that way."