Liquidity, Liquidity, Liquidity

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					Liquidity, Liquidity, Liquidity
REITs Jump on Reviving Stock Markets To Raise Capital and
Pay Down Debt

By Mark Heschmeyer

May 27, 2009

With bank lending a challenge, publicly held property REITs and real estate
operating companies (REOCs) have started turning to their investors for a bailout
- and are getting it. At least 29 property REITs and REOCs have gone to market
with secondary stock offerings in the last two months and have raised or are
raising more than $8 billion in new financing - no lender strings attached. The
money raised is being primarily used to build up liquidity by reducing the
outstanding balances on secured and unsecured lines of credit and repaying
loans upon their maturity dates. However, some of the new money is being set
aside for future acquisitions, developments, redevelopments and capital
improvements, as well. Going into 2009, most REITs cited liquidity as their
highest priority because of uncertainty in the credit markets and bank lines
expiring this year and next. The latest round of secondary stock offerings is
supplementing other efforts the companies have undertaken to enhance liquidity.
The other efforts include raising more secured financings, dividend modifications
(in the form of cuts, partial stock dividends, and/or suspensions), and asset
sales. However, securities ratings agencies have pointed out limitations to those
efforts. Many REITs have repurchased unsecured bonds in the open market at
discounts to par. While this may be an opportunistic investment opportunity to
reduce leverage, such transactions, if large enough, can weaken liquidity if
longer dated bonds are repurchased, according to Fitch Ratings. Fitch also
noted that many REITs have paid common dividends through a combination of
cash and the issuance of new common shares to preserve liquidity, but a
dichotomy has emerged with many REITs are preserving capital by choice - but
others out of necessity. Moody's Investors Service noted that the asset sales
are difficult to complete due to lack of debt capital and investor fear that prices
will continue to decline. In addition, Moody's said it expects to see a rise in
commercial mortgage default rates, which may distract lenders from originating
debt in order to focus on the performance of their existing loan portfolios. On the
other hand, the bear market rally that started in late November 2008 seems to
have ended in the first quarter of 2009 as concerns regarding the health of the
financial sector lessened, according to Duff & Phelps. The stock market rally,
which began in March, extended into the second quarter and REITs, for the most
part, have outperformed in the revived markets. "In our opinion, the declines in
real estate security share prices over the last 12 months have gone a long way
toward discounting the challenges the industry faces relative to declining asset
values and the higher cost and lower availability of capital," Duff & Phelps wrote
in its first quarter REIT review. "Thus, now may be a good time to revisit and
rebalance your targeted allocation to real estate securities." Duff & Phelps said
it expects to see more REIT management teams embracing the deleveraging
process by issuing shares, saying "it is wise to issue equity after a rally has been
underway and when such uncertainty remains as to the availability of credit and
the depth and duration of the recession." In fact, three REITs announced new
secondary offerings as this story was being written. Although certainly positive
signs, for now analysts say the supply of equity still dwarfs the need. Citigroup, in
a survey of available equity in the marketplace, estimates that REITs would need
$35 billion in total equity to bring sector's leverage down to 50% at a presumed
8% cap rate. To reduce leverage to 45% would require $57 billion in equity. "We
think the wave of companies looking to raise additional capital is large, however,
the likelihood is that the offerings will be coming from the stronger, better-
capitalized companies," said Citi. "Most of the companies with low equity values
appear reluctant to issue equity at this price, despite the need, as their market
caps have sunken below the amounts needed." The following is a summary of
the recent stock offerings from major public REITs and REOCs in the last two
months. Acadia Realty Trust in New York completed a public offering of 5
million common shares at $11.95 per share. The offering was increased in size
from the originally contemplated 4.5 million common shares. The company
received net proceeds of $59.8 million. It planned to use a portion of the net
proceeds to repay debt, future acquisitions and redevelopments of, and capital
improvements. Alexandria Real Estate Equities Inc. in Pasadena, CA, sold 7
million shares at $38.25 per share, upsized from an originally sized offering of 4.5
million shares raising about $268 million. The company intended to use the net
proceeds to reduce the outstanding balance on its unsecured line of credit.
 AMB Property Corp. in San Francisco sold 41.25 million shares at $12.15 per
share raising more than $500 million. American Campus Communities Inc. in
Austin, TX, sold 9.78 million shares at $21.25 each. The company received
approximately $198.7 million in net proceeds that were to be used to repay debt.
 BioMed Realty Trust Inc. in San Diego sold 16 million shares at $10.40 each.
Gross proceeds were $166.4 million. The company expected to repay a portion
of the outstanding indebtedness under its $600 million unsecured line of credit
with the proceeds. Camden Property Trust in Houston closed a public offering
of 10.35 million common shares at $27.50 per share. It received approximately
$272.3 million in net proceeds. Cogdell Spencer Inc. commenced an
underwritten public offering this week of 18 million shares and granted its
underwriters, Citi and KeyBanc Capital Markets, an option to purchase up to an
additional 2.7 million shares. The Charlotte, NC-based company intends to use
the net proceeds to fund a $50 million repayment under its senior secured term
loan, to reduce borrowings under the secured revolving credit facility and for
working capital purposes. Cogdell Spencer's stock has been trading around
$4.33 share, giving it the prospect of raising more than $80 million. Corporate
Office Properties Trust in Columbia, MD, offered about 2.5 million shares at
$24.35 each. Net proceeds were to total $63 million to $73 million depending on
overallotment sales. The company planned to use net proceeds to repay
borrowings. DiamondRock Hospitality Co. in Bethesda, MD, expected to receive
$82.1 million in net proceeds from a stock offering, which it intended to use to
repay debt. Duke Realty Corp. in Indianapolis, IN, looked to raise at least $480
million through a sale of 65.4 million shares. The company intended to use the
net proceeds to repay outstanding borrowings. EastGroup Properties Inc. last
week entered into a sales agreement with BNY Mellon Capital Markets to sell up
to 1.6 million shares of common stock. Proceeds were not to exceed $40 million.
 Equity One Inc. in North Miami Beach sold 6.5 million shares publicly at $14.30
each, resulting in $89 million of net proceeds. In addition, it sold Gazit-Globe Ltd.
2.45 million common shares for net proceeds of $35 million. Essex Property
Trust Inc. entered into a sales agreement this past week with Cantor Fitzgerald &
Co. to sell up to 7.5 million shares of common stock. Essex's shares are trading
around $63.58 per share currently. At the price, the company would receive
gross proceeds of about $477 million. Forest City Enterprises Inc. in Cleveland,
OH, expected to receive net proceeds from its common stock offering of $329.8
million. Forest City intended to use the net proceeds to reduce its outstanding
borrowings under the company's $750 million revolving credit facility. HCP Inc.
in Long Beach, CA, completed its $440 million public offering of 20.7 million
shares. The proceeds were to be used to repay all amounts of indebtedness
outstanding under a bridge loan facility, with the remainder to be used for general
corporate purposes. Highwoods Properties Inc. in Raleigh, NC, commenced an
underwritten public offering this week of 6.67 million shares of common stock
including over-allotment options. Trading at around $23.32/share currently, the
offering could raise gross proceeds of about $156 million. The company intends
to use the money to repay borrowings. Host Hotels & Resorts Inc. in Bethesda,
MD, raised $479 million for general corporate purposes and the repayment of
indebtedness through its follow on offering. Inland Real Estate Corp. in Oak
Brook, IL, closed a public offering of 17.1 million shares at $6.50 per share. The
net proceeds were approximately $106.4 million. Kimco Realty Corp. in New
Hyde Park, NY, sold more than 105 million shares of common stock at $7.10
each. The company intends to use the net proceeds of $717.3 million for debt
repayment and for general corporate purposes. Kite Realty Group Trust in
Indianapolis sold 28.75 million shares raising net proceeds of $88.1 million.
Proceeds were to be used to repay debt and for working capital. LaSalle Hotel
Properties in Bethesda, MD, expected to receive $119.4 million in net proceeds
from the sale of its common shares. The company intended to use the money to
reduce amounts outstanding under its senior unsecured credit facility and under
the unsecured credit facility of the company's taxable REIT subsidiary, LaSalle
Hotel Lessee Inc., and for general corporate purposes. Liberty Property Trust in
Conshohocken, PA, originally entered into a continuous offering agreement with
Citigroup Global Markets Inc. to raise up to $150 million through the sale of
common shares. This month it upped the amount to be raised to $300 million.
 Mack-Cali Realty Corp. in Edison, NJ, completed a public offering of 11.5 million
shares. The net proceeds of $275 million were to be used to repay borrowings
under its unsecured revolving credit facility and for general corporate purposes.
 Parkway Properties Inc. in Jackson, MS, sold 6.25 million shares of common
stock at $13.71 per share. Parkway intends to use the net proceeds to reduce
outstanding borrowings. ProLogis in Denver, CO, topped everybody in raising
capital by selling 152 million common shares at $6.60 per share raising gross
proceeds of more than $1 billion. The company also granted its underwriters an
option to purchase up to an additional 22.8 million shares to cover
overallotments. Regency Centers Corp. offered up to 10 million shares of
common stock and expected to raise net proceeds of $271 million. SL Green
Realty Corp. New York priced a public offering of 17 million shares of common at
$20.75 each. The proceeds including overallotment options were expected to be
$336.8 million. The company planned to use the money for general corporate
and/or working capital purposes, which may include investment opportunities,
purchases of the indebtedness of its subsidiaries and the repayment of debt at
the applicable maturity or put dates. U-Store-It Trust entered into a sales
agreement with Cantor Fitzgerald & Co. to sell up to 10 million shares of common
stock. Its stock has been trading around $2.17 per share and its offering was to
generate about $20 million in gross proceeds. Vornado Realty Trust in
Paramus, NJ, sold a total of 17.25 million shares raising net proceeds of $710
million. Washington Real Estate Investment Trust in Kensington, MD, priced a
public offering of 5 million common shares at $21.40 each. Net proceeds were to
be about $102.6 million including over-allotment options. Proceeds were used to
repay borrowings outstanding under its line of credit and for general corporate
purposes. Weingarten Realty Investors in Houston was looking to sell more
than 32 million shares at $14.25 per share including over-allotments. The
company intended to use the net proceeds of $381.9 million to reduce
borrowings outstanding on its revolving credit facility.


				
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