Another REIT Taps the Debt Market

REIT euphoria is not limited to the equity market. The REITs have found a new willing participant (not new really, but noticably absent for a while) - the senior unsecured market.

Federal Realty (FRT) announced a debt issue this morning, doing $150MM of a 5 year (talked at +350/5y).

Simon did $50MM of a 5 year reopen at +275 on Thursday, and now trades at +260/50.

Mack Cali (CLI) did $250MM of a 10 year on Wednesday priced at +411.5, and now trades 25bps tighter.

Duke (DRE) did $250MM of a 5 year at +480 and $250MM of a 10yr at +463 (yes, inverted spread). It is now trading 40bp and 20bp tighter.

Excluding FRT, we have seen nine REIT deals totaling $3.8 billion. Spreads have continued to come in (see chart below) as equities have rallied (long live the high beta, high volume rally). This has been picking up as we have seen an increase in negative stories surrounding the CRE market, adverse developments in GGP and continued weakness in rent rolls. The next step to freeing the market (we have equity and debt now) will be DDR hitting the TALF.

Disclosure: Long debt of SPG, CLI, and FRT.

Comments

[spider42000:]

What is he saying?

Aug 11 09:56 PM

[Old Trader:]

spider,

He's saying the credit market is following the run up in REIT equities, over the last few months. The credit market is crucial to REITs, since they have to rollover debt on a fairly regular basis, and also need access to debt to expand, since they can't retain and reinvest profits.


On Aug 11 09:56 PM spider42000 wrote:

> What is he saying?

Aug 11 10:05 PM