Some recent merger and acquisition activity in the real estate investment trust sector that has involved the use of debt funding has resulted in lowering of the credit quality of some of the firms involved, Moody's Investors Service reports.The New York-based credit rating agency believes that this wave of M&A activity in the sector could slowdown as institutional investors, in particular, hit their targeted real estate allocations and as other investment avenues become more attractive. This is more likely considering that REIT prices have gone up in recent years. As to whether the leveraged buyout of Equity Office Properties "represents the high water mark or the tip of the iceberg," for leveraged buyout activity, Moody's analyst Christopher Wimmer notes that "the REIT privatization party may not be over, but it could be time to switch to water." And John Kriz, Moody's managing director of real estate finance, does not believe that the public ownership of real estate through REITs is becoming a less popular model.

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