REITs: Insurers Supplant Banks As Lenders

Five important quotes from Washington Real Estate Investment Trust's Q3'08 conference call: (WRE)

 

Counting on expanding government to see them through this crisis: 

 

George F. McKenzie, President and CEO:

In general, delinquencies are increasing, vacancies persist longer and the number of tenants expanding their business by taking additional space are diminished or non-existent… I am cautiously optimistic that the presence of the Federal government and our region’s resilience will provide sound footing in these powerless times.

WRE's property portfolio is concentrated in the Washington D.C. area.

 

Keeping debt under control:

 

Sara L. Grootwassink, EVP, CFO:

Since September we have raised more than $100 million in equity in an average share price of $35.46 and fully repaid all borrowings on our lines of credit... Our only [upcoming] debt maturity is a $50 million residential property mortgage due in October of 2009.

Rising bad debt in the industrial and retail sector:

GM: Year-to-date in 2008 somewhere in the neighborhood of 3% of our industrial portfolio is suffering bad debt expense today… In the retail sector, closer to 2%... On the retail and industrial portfolios we’re going to see probably [a delinquency] increase of 200 basis points.

Insurance companies stepping in for banks:

SG: At this point, a few banks might be willing to give you some on balance sheet lendings, the ones that you have very long term relationships with. But in general, the only commercial real estate secured debt is going to come from insurance companies at this point.

Of course, they’re taking advantage of that position and requiring very low loan-to-values and on occasion recourse which is something that’s new in the market place. So, there’s not a lot of debt available. Fannie (FNM) and Freddie (FRE)… seem to be operating business as usual.

Unsecured lending is dead:

SG: In terms of unsecured debt, the spreads are just dramatically widened and of course there’s been no corporate bond issuances in the REIT sector in quite some time and I don’t anticipate that there will be any time soon.

 

Comments

[poncawolf:]

Hey Every Body – What if I drove down your Credit Rating?

Let’s say I was going to give you a loan – A loan of taxpayer’s money – I got it for nothing.

But you apply for a mortgage – car – anything – But I have sold your info – and now there are many – many - inquiries on your credit report – You had a 700 – But now it’s 620.

You could have got a good interest rate – But now you’re a higher risk – Low and behold – Man did I just make a lot of money – On interest alone.

Then add on the fees and all – Don’t you just LOVE deregulation.

I just made you take out a subprime loan.

Then socialism just for the rich – The Poor once again bailing out – These type of Banks – Mortgage companies.

2008 Oct 28 06:13 PM

[madasiwannabe:]

Poncawolf, it doesn't work that way. The only inqueries that count against you are the ones made by you applying for credit. Inqueries by banks before they send you a pre-approved are on a completely different section of your report. What kills your credit is filling out applications when your car shopping and end up not buying. They are looked at as if they were rejections. Another killer is switching credit cards. They stay on your record as lines of credit, even after they are closed. Better to call the company and throw a fit when they bump your rates up. Works every time.

2008 Oct 28 09:33 PM

[poncawolf:]

Total Ban – Any Company – That Isn’t - A Patriotic American Company

If they want to threaten the American People with – They have lower tax rates – So we will move there – Then so be it - - Don’t let the American Door hit your big arose on the way out.

But you sell there too – Because WE the American People – Don’t buy from UN-Patriotic Companies.

2008 Oct 29 12:36 PM

[poncawolf:]

John McCain – You Had A Chance To Show How Ready You Are – You Broke.

We have been putting up with Coward Run away Bush - and Five deferments Cheney – For the Last 8 Years.

Now all we Have to ask – Is one simple Question? When McCain broke – and betrayed all men on the ground – How many boys died because of that?

Now ask yourself – This question? – If the pressure gets as great as it did before – Who is McCain selling out this time?

2008 Oct 30 12:35 AM