Big K

The Great REIT Unravelling Begins? Simon Property Group Defaults on Loan

Some REITS like many other companies loaded up on interest only debt, never paying any of the principle off. When it comes due, they just rolled it over and borrowed even more. A Ponzi scheme thus was born. The US government is doing the same thing, but on an even grander scale. The leverage house of cards will eventually fall, and those entities that practice this nonsense will ultimately disappear. The entire REIT sector has been lumped into this group, however, not all of them have levered up their balance books so irresponsibly. If we go back to an 18th century style economy, I would say all REITS are in trouble. But that scenario aside, I think most REITS will survive, although I would like to see them pay down debt as in amortization. I think these interest only balloon type loans should be history.