http://www.reit.com Imminent debt maturities pose a “looming problem” for the commercial real estate industry, according to Roy March, CEO of Eastdil Secured.
March offered his thoughts on the state of the capital markets in an interview with REIT.com at The Real Estate Roundtable’s fall meeting in Washington. Despite the large amounts of debt coming due, March speculated that different sources would step up to enable borrowers to refinance their debt. He included mortgage REITs, the commercial mortgage-backed securities (CMBS) market and commercial banks within that group.
“There’s a lot of cash on the sidelines,” March said. “Ultimately, whether it’s the banks or special servicers, we expect that they will work with borrowers to extend those maturities out. We’ve already seen that in 2009, 2010 and parts of 2011.”
In light of the recent downturn in the equity markets, March advised not to expect many companies going public in the near future. He pointed out that the public markets aren’t offering premiums to net asset values (NAV) for REITs at the moment and, in fact, are pricing REITs at a discount to NAV. Between pricing and the costs of underwriting and fees, March said going public in the current market offers limited benefits to private commercial real estate companies.
“Clearly, as the public companies are trading either at or at a discount to net asset value, I don’t see [private companies] accessing the market any time soon in the equity markets, although we do feel like they’ll be accessing the unsecured credit markets pretty frequently in this environment,” he said.
March posited that commercial real estate actually may be a popular option with investors looking for alternative investments in the current climate. The low rates currently being offered on 10-year bonds make REITs and commercial real estate a “very attractive alternative investment,” according to March.
By Allen Kenney
Duration : 0:4:30