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Will REITs Face Funding Squeeze?

As rating agencies tighten up ratings for commercial mortgage debt securitizations, some deals relying on such funding may not be closed.

Risk associated with real estate investment is being underpriced, according to John Kriz.

"People are not being paid as much as they should be for some of the risk they're assuming," he noted at a panel session on risk at the National Association of Real Estate Investment Trusts' investor forum here.

Mr. Kriz, managing director with a Moody's Investors Service group that rates unsecured REIT debt, said, "The glass is less than half empty and draining," adding that it is "worrisome" to see prices in "secondary and tertiary markets being bid up."

Jay Sugarman, chairman and CEO, iStar Financial, doesn't believe that real estate is out of whack in relation to the global investment spectrum.

Marjorie Tsang, assistant deputy comptroller, New York State Common Retirement Fund, believes that real estate is priced appropriately relative to other classes. Real estate has been "unbelievably stable and much more transparent," according to her.

Steven Sakwa, senior director, Merrill Lynch & Co, said that unleveraged risk has come down. "Where we have taken a more conservative view is we think growth rates are maybe not going to be achieved," he noted.

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