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Monday, 14 December 2009

50 Largest REITs Continued to De-Leverage During 3Q

Commercial Real Estate Direct Staff Report

The 50 largest property-owning REITs continued to de-leverage during the third quarter, as favorable market conditions allowed them to continue raising fresh equity.

The companies increased their total market capitalization - defined as the sum of their equity, preferred equity and debt, less the amount of cash held - by 14 percent to $464.5 billion in the third quarter. So while the dollar amount of their debt remained essentially flat at $245 billion, their overall leverage level fell to 52.8 percent of total market capitalization from 60.1 percent in the second quarter.

Helping the cause was the fact that REIT share prices rose by nearly 30 percent during the quarter. The FTSE Nareit U.S. Real Estate price index skyrocketed to 103.25 at the end of September from 79.51. That prompted some $4 billion of stock issuance by existing REITs during the latest quarter. So far this year, REITs have raised a total of nearly $17 billion by selling shares. In nearly all cases, the offerings were heavily dilutive to existing shareholders, but the market generally didn't flinch.

Separately, REITs have raised $11.4 billion by selling unsecured shares during the year, with nearly half that - $6 billion - coming during the third quarter. Those offerings have allowed REITs to address upcoming debt maturities.

They've been wildly successful at that.

The top-50 REITs, which as of the end of the second quarter faced the maturity of $4.8 billion of debt this year, had reduced that to $2 billion of maturities by the end of the third quarter. Those data exclude General Growth Properties, whose debt is being extended under bankruptcy.

Next year, the 50 largest REITs face $17.3 billion of maturities, down from $22.1 billion at the end of the second quarter.

Boston Properties faces the most debt maturities this year at $182 million. But the company has $782 million of cash on its balance sheet, so it shouldn't have a problem addressing this year's maturities and next year's $122 million of maturities.

The number of REITs facing $1 billion-plus maturities next year has fallen to four from seven.

Company

Total Debt
$mln (3Q '09)

Total Debt
$mln (2Q '09)

2010 Maturities
As of 3Q '09

2010 Maturities
As of 2Q '09

Simon Property Group

25,041.33

24,172.36

3,073.47

3,017.93

Vornado Realty Trust

14,905.73

14,620.99

899.07

1,016.28

ProLogis

7,706.11

7,886.03

231.00

1,104.00

Macerich Co.

6,996.62

7,900.14

1,579.39

1,994.49

CBL & Associates

6,253.57

6,252.55

573.41

1,061.92

Developers Diversified

6,214.73

6,774.60

1,118.30

1,254.91

AMB Property Corp.

3,543.52

3,543.22

1,336.56

1,410.71

Source: Company filings

Simon Property Group, the industry's largest REIT with a total market capitalization of $49.3 billion, naturally has the biggest maturities. Next year, $3.1 billion of its $25 billion of debt comes due. And in 2011, another $3.2 billion comes due.

But the company has been very adept at tapping the capital markets, even when they were virtually shut down. It was, for instance, first to market with an unsecured notes offering this year when it priced a $650 million issue. Weak conditions dictated a coupon of 10.35 percent. A more recent offering, in August, had a coupon of 6.75 percent. It has also raised $1.7 billion of equity by selling shares in March and in May.

Simon has some $7 billion of available liquidity in cash and untapped credit.

Among the most highly leveraged REITs are GGP, which is still operating under bankruptcy, Maguire Properties and Forest City Enterprises, whose debt is comprised in large part of construction loans on projects it is developing. The list of the most heavily leveraged REITs is deeply weighted with companies focused on the retail sector.

Most Heavily Leveraged REITs

Company

Sector

Total Mkt Cap
$mln (3Q' 09)

Debt
$mln

Leverage Ratio %

General Growth Properties

Retail

29,539.78

27,868.26

94.34

Maguire Properties

Office

4,947.59

4,582.89

92.63

Forest City Enterprises

Retail/
Office

9,618.28

8,576.19

89.17

Pennsylvania REIT

Retail

3,182.84

2,835.59

89.09

Developers Diversified

Retail

7,540.00

6,214.73

82.42

CBL & Associates

Retail

8,384.87

6,253.57

74.58

Macerich Co.

Retail

9,820.18

6,996.62

71.25

Aimco

Apartment

7,881.00

5,541.00

70.31

Lexington Realty Trust

Net-Lease

3,074.83

2,132.25

68.35

SL Green Realty

Office

10,554.69

6,859.70

64.99

Source: Company filings

Comments? E-mail Orest Mandzy or call him at (267) 247-0112, Ext. 211.





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