Developers' aid push could boost local firms

December 22, 2008
Some of the nation's largest commercial real estate trade groups are asking the federal government to come to the industry's aid-a push that, if successful, could give a boost to Simon Property Group Inc. and other Indianapolis-based developers.

The Wall Street Journal reported today that the commercial real estate industry is asking to be included in a $200 billion loan program recently created by the government to assist the market for student loans, car loans and credit-card debt.

It is not clear whether any of Indianapolis' trio of publicly traded commercial real estate developers-Simon, Kite Realty Group Trust and Duke Realty Corp.-are playing an active role in the discussions.

Duke spokesman Joel Reuter did not have immediate information on his firm's involvement, but said, "It would be safe to say any effort by our policymakers to free up capital in today's economy would be viewed as a positive." Simon and Kite officials couldn't be reached.

At issue for the industry is hundreds of billions of dollars in mortgages on office buildings, hotels, shopping centers and other commercial buildings that are scheduled to come due in the next three years.

Refinancing such debt often was routine in the boom years. Now, however, "For many borrowers [credit] simply is not available," a dozen real estate trade groups wrote in a recent letter to Treasury Secretary Henry Paulson.

One of the groups signing the letter was the National Association of Real Estate Investment Trusts, of which Simon, Duke and Kite are members.

Tight credit markets have contributed to a sharp decline in the stock prices of nearly all publicly traded real estate companies this year. Shares of Simon, the nation's largest shopping mall owner, are off 38 percent. Meanwhile, shares of Kite, a retail developer, and Duke, an office and industrial developer, are off more than 55 percent.

Last week, Moody's Investors Service downgraded the credit ratings of Duke due to what it called the company's "strained credit metrics."

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