Investors Sold REITs in Response to the Banking Crisis. They May Have Overreacted.
April 3, 2023 | Hannah Zhang | Institutional Investor
The recent collapse of Silicon Valley Bank has had a knock-on effect on the value of real estate investment trusts. But real estate experts believe that the banking crisis isn’t likely to result in long-term problems for the REITs market.
REITs, which are companies that own and operate income-generating real estate properties, fell 8.3 percent in the two weeks following the March 10 demise of Silicon Valley Bank, as measured by the MSCI U.S. REIT Index. The performance of office REITs was even worse. SL Green Realty and Boston Properties, two big office REITs, declined by 33 percent and 18 percent, respectively, over the same period.
REITs, many of which own office buildings that have declined in value since the pandemic, are now facing lenders with lower appetites for risk.
“I think there’s a public perception that REITs are highly levered vehicles, have a lot of debt coming due, and don’t have a lot of funding sources away from commercial mortgages,” Rich Hill, head of real estate strategy and research at Cohen & Steers, told II. “When you take these things in totality, it would stand to reason that if they were true, REITs should be under pressure.”
