Foreign investors in U.S. real estate are seeking to preserve capital rather than maximize returns, and that is lowering cap rates, says CBRE National Partners' Senior Vice President Michael Kendall. "In many cases, they simply want to get money out of their home currencies and into dollars as a safe haven," he says.
Corporate Office Properties Trust is eyeing $350 million in proceeds from its recent pricing of unsecured senior notes. The REIT has had a busy year in the capital markets, according to Steve Riffee, executive vice president and chief financial officer.
Moody's Investors Service's outlook on U.S. REITs is stable. The rating agency cited REIT portfolios' high occupancy rates and their outperformance in most markets. "The REITs continue to successfully navigate through difficult capital market conditions," said Philip Kibel, a Moody's senior vice president.
The Basel III rules for banks are meant to avoid government rescues in financial crises, but the regulations could make it more difficult to fund infrastructure projects. "Banks have been the stalwart of privately financed projects," said Andrew Davison, senior vice president at Moody's Investors Service. "If long-term lending requires more capital to back it, it affects the enthusiasm of banks to provide it."
The mortgage crisis probably will intensify in the months ahead as defaults increase, lending lessens and home sales stall. What's more, experts now are watching for signs that the commercial real estate sector will follow suit.