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.
In commercial real estate, as with most commercial financing, a borrower’s personal credit rating looms large in the eyes of “A” list lenders offering the most attractive interest rates.
A recent patent filed by Facebook has raised eyebrows, suggesting that the credit ratings of your Facebook friends could possibly affect decisions made by lenders about you — or by extension, about any entity doing any borrowing where your personal liability is a factor.