Mortgage REITs have been getting plenty of attention lately.Their proponents--the sponsors and Wall Street bankers--tout themas a solution for providing the real estate debt markets withdesperately needed liquidity. And yes, they may provide somefunding to refinance borrowers with few other available sources inthe parched mortgage markets. But given the $300 billion or so inloans that need refinancing over the next five years or so, the $3billion in mortgage REIT IPOs won't make too much of adent. Still, something may be better than almost nothing.
Really, mortgage REITs are a pure and simple opportunistic play.The idea isn't to rescue borrowers, it's to takeadvantage of them. These vehicles will not only originate new loansat healthy spreads, but also invest in busted CMBS portfolios andpools of failed bank mortgages.The idea is to buy into markets atlows and ride the cycle back up. Doesn't sound toorevolutionary or necessarily too benevolent, does it?
Mortgage REITs mark the first foray by Wall Street back intocommercial real estate after their drubbing in the CDO/CMBSdebacle. The next gambits will be IPOs for equity REITs to bail outfailed developers and private real estate owners with large realestate holdings now under water. That's the same playbookdusted off from the early 1990s when some major players wereveering into bankruptcy. Presto chango they gave up private controlto retain some measure of their fortunes in public companies andlived on to reap large gains in the most recently ended upcycle.
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