Over the past few months, quite some property firms raised additional equity. For most of these firms, this has not been a luxury position. Many property investors have been forced – directly or indirectly – to raise equity in order to comply with bank covenants, to strenghten their weakened balance sheets and – maybe most important – for deleveraging purposes. Other means by which balance sheets are strenghtened include obviously selling off assets. (E.g. Vastned Retail, announcing it has sold a portfolio that has been tagged ‘non-core’).
Deleveraging: that is not something property investors are likely to do. They’re forced by market circumstances to repay their debt.
In the past few months, we have seen a lot of property investors undertaking secundary issues, rights issues of claim issues in order to attract additional capital. The success of these issues has not been overwhelming – given the limited amount of interest under the circumstances – but most firm succeeded in their prime goal: raise capital to repay loans.
It may have been their prime goal to raise capital for debt; many property investment firms (and funds) have been attracting fresh capital for other means: to benefit from opportunities that arise from the re-pricing that we are undergoing. Today’s yield gap is quite attractive in most established markets. Now cash-rich investors with vision and guts take a bet on the property markets recovering in the longer run.