adds1973, good discussion.In my view the problems is that REITs...

adds1973, good discussion.
In my view the problems is that REITs originally were established to give investors exposure to real property investment with long term stable income and capital growth . Initially the gearing of REITs didnt exceed 30% LVR. Why? For precicely the reason we are experiencing right now. Gearing was conservative to withstand valuation fluctuations.
We have had a debt fuelled credit expansion over the past 10 yrs,with massive miss pricing of risk and bang here we are, credit crunch!! IIF current gearing levels are NOT SUSTAINABLE. Someone on this post mentioned 90% LVR, this is ridiculous commentary.
I think the lead bank in the debt syndicate is ANZ, and NAB are in as well.
Remember these banks have hundreds of customer with high leverage positions currently and are nervous about their exposures. I would guess the majority of these customers do not have high quality income producing real estate like IIF. Customers with development sites are mostly breaching covenants, and the debt is recoverable at only a percentage of its full value. The banks want capital back from cutomers. The risk with IIF is there is no solution to reducing its gearing when assets are trading at the current values. The banks will need to very, very patient, like for years, which is unlikley, or they pull the trigger. At least IIF have investment grade assets that are saleable at the right level of discount ie > 25-30%