REITBull

Has the Well of Merrill REIT Offerings Suddenly Run Dry?

Good call. This property is 54% occupied and Simon has over $1billion on their balance sheet--- doesn't sound like a distressed sale or a core asset to me. This guy is more concerned about conspiracy theories than real analyses.


On Jun 16 09:08 AM HotCarNut wrote:

> This might just be the dumbest analysis I've ever seen, and that's
> saying something. Large real estate companies are CONSTANTLY evaluating
> their portfolios and looking to buy high quality assets and divest
> assets that aren't performing. A company like Simon that has grown
> through a lot of acquisitions has probably acquired a number of properties
> that it normally would never have bought but were owned by the acquisition
> target. In fact, I'd bet if you looked at the property table in their
> 10K and annual report, you could identify which assets SPG is likely
> to want to dispose of. In my view, this disposition activity doesn't
> signal that SPG isn't in the market to acquire assets or entire companies.
> It merely looks like normal course of business. I would only become
> concerned if high-quality assets in fundamentally strong areas were
> going on the block. Those "fortress assets" as companies like to
> call them are the true signal of intent or distress, not an underperforming
> property in Omaha.

Putting the REIT Maturity Crunch into Perspective

It's important to note that these are revolving lines of credit that are usually issued by a syndicate of banks (not just one such as Merrill). The line does not close by paying the balance off. For example, a REIT could have $1 billion outstanding on its $3 billion line of credit. Let's say Merrill underwrites an equity offering to raise $1 billion. Merrill would receive seperate fees for underwriting the offering and the REIT would receive the $1 billion from the funds raised and pay off the outstanding balance. From Merrill's perspective, they will no longer be receiving interest payments if there is no balance outstanding on the line, so I do not agree that this is the scam that people are making it out to be. The REIT can draw down the line again in the future and Merrill and the other syndicates will be required to fund the draws.

Simon Property Group has $3 billion on their line of credit in addition to $1 billion in cash (thanks to the recent equity offerings). Having this amount of availabilty on their line allows them to use the $1 billion in cash to make opportunistic purchases or retire outstanding debt. This will allow them to grow FFO in the long term and will outweigh any short term dilution.

On May 13 09:01 AM dcb wrote:

> So you pay down this line of credit so you can tap it again?
> Does this mean the money being raised by Merrill (lets say) by underwriting
> is going back to the credit line at merrill? wouldn't that be some
> kind of conflict of interest? I raise equity and dilliute shareholders
> to pay myself back?
>
> Please explain?

Putting the REIT Maturity Crunch into Perspective

"Amusingly, the REITs which face staggering near-term maturities are still unable to access the debt capital markets (with one or two notable exceptions), yet have raised well over $10 billion in equity to date (which they have used almost exclusively to pay down the cheapest form of capital: secured credit facilities: why?) leaving one to truly wonder just what is the big picture here really all about (aside from ML pocketing dilution cash)."

The "big picture" here is to leave their credit facilities open. If a REIT cannot refinance an upcoming debt maturity, they will tap the credit facility to avoid a maturity default. This leaves the REIT more time and flexibility to find financing or sell assests if needed. SPG has about $3 billion of availability on on their credit facility. Many others have over $1 billion available.

Mack-Cali Late to the (Follow-On) Party

Not all CRE are REITs, but I get the point.


On May 01 08:47 AM yellowhoard wrote:

> So, when I drive by vacant strip malls and office buildings, I need
> to stop believing my lying eyes.

Open Letter to SEC: Wall Street's REIT Bait-and-Switch

Yeah, like AAA subprime ratings?


On Apr 22 04:47 PM Lightway wrote:

> I've pretty much put analyst buy/sell recommendations up there with
> credit agency debt ratings. Neither is reliable.

Open Letter to SEC: Wall Street's REIT Bait-and-Switch

Tyler lays out a very good case. I appreciate the work he has done on this and his work to highlight conflicts of interest.

However, I find it hard to be sympathetic to investors that rely soley on analyst recommendations to purchase or sell a stock. If you are not going to do your own homework, be prepared for additional risk.

Disclosure: I'm long REITs

Wall Street Already Back to Its Criminal Ways?

I am all for weeding out corruption and conflicts of interest. However, as Alan Young alluded to, I'm not sure that the upgrade to BUY was the cause for the stock popping 30%. And if it was, shame on the investors who blindly bought a stock based on an analyst's recommendation.

BofA, Wells Fargo: No Equity After Accounting for Bad Loans

The decline in Wells Fargo, while unfortunate, was inevitable. It is actually a positive sign to the broader market. This credit crisis was not going to bottom until Wells faced the music.