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REIT Risk: Bank Borrowing Rising

English: US Bank tower in Denver, Colorado. Are banks a source of REIT risk?

The real estate investment trust (REIT) is an investment vehicle with a particular sensitivity to borrowed capital. REIT risk tied to capital source is heightened because the legal structure of a REIT is centered on distributing the vast majority of its earnings to shareholders.  This means the REIT is prevented from holding back significant capital reserves, which in turn means it must borrow to finance its acquisitions and operations.  That borrowing takes the form of credit from bondholders and from banks.

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