Paying the Bill

10/31/2012 | By Matthew Bechard

Published in the January/February 2012 issue of REIT magazine.

Don’t tell any apartment REIT CEOs, but I had to emigrate from the burgeoning Renter Nation. I’ve been a renter for much of my adult life, but with a family that now includes three children, two dogs and some ridiculously large plastic playthings, it was time to wade back into the murky waters of homeownership.

When we decided last fall that it was time to move it had been a little more than six years since my wife and I had gone through the home buying process. Neither of us had fond memories of that situation. It was similar to going through a drive-through and finding out when you get home that you were overcharged and they forgot your fries.

Well, as it turns out, that was a five-star experience compared to this time around. Imagine going into a familiar restaurant except the service is unbearably slow, your order keeps coming out wrong and when you go to pay, your credit cards are declined.

With access to both equity and debt capital, many are sitting on dry powder

The tip of the sword was qualifying for a home mortgage. It is understandable that loan requirements are much more stringent now. Given the depths of the financial crisis, I was glad to see lenders were no longer giving away mortgages like candy on Halloween. But things now swung so far in the other direction that I worried charging one additional latte could torpedo our ability to qualify for a loan.

Part of the issue revolves around the uncertain future and role of Fannie Mae and Freddie Mac, as discussed in this issue’s Sector Spotlight column. As the role of GSEs is likely scaled back, other players in the financial sector will be called upon to recapitalize several trillion dollars of home mortgages and mortgage-backed securities (MBS). Thus, in the coming years, mortgage REITs may have a significant opportunity to expand their presence in the home mortgage and MBS markets.

The feature article “Day of Reckoning” reveals that the situation is similar, albeit on a much grander scale, in the commercial real estate industry. With a wave of debt maturities coming through in the next several years, private real estate owners may well face a second credit crisis. Where will they find funding, and how affordable it will be if it is available? The bill is coming due, and the bill has to be paid.

That is where listed REITs come in with the ability to access more as they will be a major player in recapitalizing the market.

As a matter of fact, looking at the outstanding balance on my own mortgage, maybe I should be reaching out to some REIT CEOs after all.

Matthew Bechard
Editor in Chief


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