NEW YORK CITY-Sales activity may be stagnating right now because sellers aren’t willing to accept lower prices for their assets, but the heads of many REITs believe investment activity will eventually have a chance to pick up. That’s because many of the aggressively underwritten financing transactions that were closed in the past few years through the CMBS market will come to maturity, and refinancing those deals will be difficult.

At Bank of America’s Investment Conference, Equity Residential CEO David Neithercut and Keith Guericke, CEO, and Michael Dance, CFO, of Essex Property Trust, stated that the current focus is on the firms’ balance sheets and preparing to take advantage of opportunities when they do arise. The executives from both REITs believe it’s likely that financially troubled Lehman Brothers will be looking to unload some assets down the road, particularly those it gained in its JV acquisition of Archstone Smith, as well as some mezzanine debt portfolios on the West Coast.

In terms of operations, the management of Equity Residential and Essex said fundamentals have moderated even more. They didn’t go into specifics on how, but neither company changed its full-year earnings and property-level guidance range. Uncertainty over the financing environment, particularly in light of the federal takeover of Fannie Mae and Freddie Mac, over the next year will have an effect on deal volumes and pricing. Neithercut admitted that Equity Residential’s recently completed $550-million financing deal with Fannie Mae probably would not have been able to get closed today. Meanwhile, Essex’s Guericke noted that the spreads on GSE debt are still lower than in public unsecured financing.

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