Published September/October 2012
The feature story in this issue of REIT, “Europe Under Siege,” demonstrates once again the critical advantage for companies of being able to access the public capital markets, especially in an uncertain financial climate when loans from banks and other lenders may be difficult to obtain.
The dynamic in the European marketplace that the story describes is somewhat similar to the one playing out in the U.S. A large volume of loans taken out at the peak of the last real estate market cycle is coming due. Many of the properties will have difficulty being refinanced, and many will be put on the market – either by distressed owners or lenders that take possession of them.
The market situations in Europe and the U.S. have another commonality, as well: they present attractive acquisition opportunities for potential buyers who have access to capital. In the U.S., listed REITs unquestionably have that access.
U.S. REITs have used the capital they have raised to fund their growth
In the three-year period from 2009 through 2011, listed U.S. REITs raised $133.4 billion in equity and debt from the public markets. Last year was the strongest in the REIT industry’s history for public securities offerings. REITs raised a record $51.3 billion in debt and equity, including a record $37.5 billion in equity offerings.
REITs this year are on track to break that record. In just the first seven months of the year, the industry has raised $41 billion in the public markets, including $28.6 billion in equity.
U.S. REITs have used the capital they have raised to fund their growth – importantly through active strategic acquisition programs. In 2010, REITs were net acquirers of $12.4 billion of properties for their portfolios. In 2011, their net acquisitions increased to $14.9 billion of properties. In sharp contrast, private landlords, without access to the public markets, were net sellers of $6.6 billion of properties in 2010 and $16.3 billion in 2011. Public U.S. REITs today own approximately $850 billion of commercial real estate assets.
Beyond funding their growth, REITs have used the capital they have raised to execute an additional critically important strategy: reducing their debt. The equity REIT industry’s debt ratio currently stands at less than 36 percent. That is down from approximately 66 percent at the trough of the real estate market cycle in March 2009 and near its historical low.
The U.S. REIT industry today is a marketplace of companies that are financially strong, with solid balance sheets and the resources to take advantage of the additional opportunities that will lie ahead.
As I complete my term as NAREIT’s 2012 Chair this fall, I am very gratified to have had the opportunity to represent the REIT industry during this period of exceptional accomplishment and growth.