New York—REITs have been raising capital on the stock market in earnest since the beginning of this year.
Apartment REITs that have had secondary public offerings include Camden Property Trust (9 million shares at offer price of $27.50; on May 6), Post Properties Inc. (3.5 million shares at offer price of $17.75; on Sept. 24), and American Campus Communities Inc. (8.5 million shares at offer price of $21.25; on May 5). AvalonBay Communities has raised secondary debt (on Sept. 8).
According to the National Association of Real Estate Investment Trusts (NAREIT), there have been 73 secondary equity offerings in the REIT industry this year through Sept. 30. The total capital raised has been $19.3 billion.
By comparison, there were 69 secondary equity offerings and 11 debt offerings in all of 2008, raising a total of $17.5 billion.
NAREIT notes that publicly traded REITs have been able to secure equity and debt “at a time when debt maturities loom over the broader commercial real estate market and access to capital will be a key to survival.”
Brad Case, NAREIT vice president of research and industry information, told MHN that REITs have been trying to preserve capital to prepare themselves for acquisition opportunities down the road. Notably, a large volume of properties and/or loans is expected to be released resulting from maturation of loans that cannot be refinanced.
“REITs now have a large cost of capital advantage,” says Case. REITs have a number of capital-raising avenues available to them: secondary equity offerings, debt offerings, corporate debt, and bank lines of credit.
According to NAREIT, there have been 23 unsecured debt offerings in the REIT industry in 2009 through Sept. 30, which have raised a total of $6.7 billion. All except one of these deals occurred in the third quarter.
Of the eight Initial Public Offerings this year, seven have been for mortgage REITs. Case said that equity IPOs are not likely to start until loan maturities force properties to the market in large amounts, a trend that is expected to hit its peak in 2011-2013.