Are REITs Getting Ahead of Themselves?

Yesterday, we noted how REITs have been tapping the unsecured debt markets. After FRT announced their deal yesterday, Weingarten (WRI) tried to tap for $100MM but the investor interest wasn't there and it looks like they will carry their deal over to today's business (looking north of 8%).

Prologis (PLD) is tapping the unsecured market today for $350MM at around +450ish (think low 7% range). If you recall, PLD was thought to be on death's door last year (and earlier this year) where their bonds (18s) traded down to the 30s to yield over 25%. PLD has changed the covenant package back to the "old school" covenants by tightening up the unencumbered asset ratio (1.50:1 from the 2005 1.25:1) and the debt incurrence test (60% of total assets from the '05 65%).
In other REIT financing news, Westfield Group received commitments of more than $1.4 billion for a $1.25 billion loan after courting investors in Asia, three people familiar with the situation said. This looks to be a forward start commitment to refinance their 2011 revolver maturity.

While BoneYard agrees that REITs are compelling (much less so than a quarter ago, but...) it appears that they may be getting ahead of themselves. Then again, the high vol, beta trade is alive and well (more on that later).

Disclosure: Long PLD bonds and preferred, long FRT bonds, long WRI bonds and lonf WDCAU bonds.

Comments

[jimmy46:]

Access to the capital markets is one of the best ways an outsider can see which debt laden firms are going to make it,
and which aren't.
thx for the info

Aug 11 02:34 PM

[Milind Para...:]

thanks for the info

Aug 12 02:06 AM

[davidbdc:]

I already did my REIT buying for this year.....but if I had a CD expiring I'd choose investing in several of the REIT's paying 8,10,12% interest at their current price. With CD's and MM accounts paying basically less than inflation we'll see more and more money flowing into REIT's as they continue to improve their balance sheets.

Aug 12 01:04 PM

[daddy rabbit:]

Does anyone have any financial information on Inland Western Have thay been able to re-finance?
Thanks
P. dean
[e-mail]

Aug 17 12:37 PM