Mr. Wigginton: It depends on your perspective. The stocks have clearly responded favorably in the second quarter, largely as a result of the equity offerings that occurred across the industry. I don't have the exact number of offerings that took place or the amount of capital raised, but I believe it was over 10 billion of equity capital raised in the second quarter. Close to the end of first quarter, REITs were trading at extremely distressed levels. Liquidity concerns and fears of insolvency pervaded the marketplace. With the equity capital raised, those concerns have been alleviated in large part.
TWST: I read that there were 52 secondary offerings that raised 16 billion so
far this year. Has this solved the problems of the industry or is it just a
stopgap measure at this point?
Mr. Wigginton: REITs sometimes get unfairly grouped with the overall commercial
real estate industry. While they are commercial real estate owners and
operators, unlike a lot of the smaller, private operators, they are much better
capitalized, they have greater access to capital and typically own the better
properties in the markets in which they operate. I'm speaking from a retail
perspective only here. I think you can say there are signs of life, but they are
faint.
When looking at property fundamentals, vacancy rates are increasing and rental
rate growth is declining. In addition, you're facing macro headwinds in the form
of high unemployment rates, declining consumer spending, negative consumer
sentiment and stagnating wages in general. The federal stimulus package helped
prop things up a little bit, but it's still hard to get a clear read on what the
run rate will be going forward.
Tickers included in this excerpt: DDR, FRT, PEI, SKT, SPG
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