From a small northwestern observatory…

According to SNL Financial, U.S. Equity REITs have raised $35.27 Billion through August 10th, over 10% more than was raised during the similar period last year.  Continuing with the debt/equity theme we noted in a recent post, senior debt only constituted about 38% of this total ($13.53 B) with the remainder coming from common equity ($14.72 B) and preferred equity ($7.02 B).

Interestingly enough, Health Care REIT had the largest stock offering at $810.8 million, followed by Kilroy at $230.5 million and Taubman Centers at $281.5.  All three of these are notable, as none of them are in the “hot” apartment sector.  Indeed, of all of the sectors, health care raised the most at $7.7 Billion, followed by retail at $7.61 B.

The bigger question, of course, is what does this say about the real estate market?  REITs buy cash flow, not capital growth, and respond to investor demand for something to take the place of flat-lined bonds.  Given the risk of holding long-term bonds in an up-ticking interest rate market, compared to the yield margin and inflation hedge of REITs, this may be less a commentary on the quality of the property market and more a comment on the demand for REIT shares.