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Rising Cost of Capital's Effect on REITs

ReitTrends.com has a commentary up on the effect of the rising cost of capital on REITs.

Case in point: Cost of capital. Many REITs that have nothing to do with sub-prime lending went down recently in sympathy with the mortgage REITs. You had a higher than anticipated default rate, then a credit squeeze, then downgrades, then equity downgrades, then another rush for the exits, then a repricing of risk, then another credit crunch, a couple of hedge funds busted, a couple more got rescued…exciting headlines, lots of fun for the talking heads, but nothing to do with my Shopping Center REIT or Industrial Property REIT, right?

Wrong.

Remember, stock and bond markets are CAPITAL MARKETS. You and I use them toward their secondary purpose…we buy and sell securities from other buyers and sellers in a secondary market. Primarily, though, capital markets are how firms raise capital. Especially important for REITs.

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