Finance partner Paul Cushing recently sat down to talk about Alston & Bird’s finance area’s recent REIT milestone: $90 billion in REIT financing. Cushing—whose practice focuses on representing both financial institutions and companies in a wide variety of financing transactions, including syndicated financings, secured financings, acquisition financings, bridge loans, securitizations, structured financings and public and private debt issuances—discussed current market trends and challenges.
$90 billion in REIT financings is a huge number; you reached $60 billion just a few years ago. Are the amount and size of the deals continuing to grow?
Yes—we closed over $2 billion just this week. We’ve also expanded our number of clients, which obviously also helps increase the growth rate.
Is the market back? Fully recovered from the low point in 2009?
I’m not sure I would say it is 100 percent back, but at the same time, I’d argue that it did not suffer as much damage as other markets, so the climb back is not quite so steep.
What trends are you seeing? Are rising interest rates calming the market? What opportunities are REIT clients taking advantage of?
As the financial markets recovered, REITs took advantage of an increased supply of financing options to lock in lower pricing and extend maturities on their lines of credit. Also, many REITs are tapping into the institutional appetite for outstanding loans by adding term loans to their cap stack—some as long as seven years, which can compare favorably to a bond execution.
What’s the biggest change/evolution in your REIT practice in the last five years?
The most critical challenge has been reconciling experiences from the Great Recession with the realities of the current, ever-more-competitive lending market. The amount of money to be lent exceeds the demand, so lenders have to be aggressive to keep—much less win—business.
Final question—what significant trend do you foresee playing out in the REIT market over the next few years?
I think we will see continued consolidation in the market, both through mergers and large portfolio acquisition.