johnthebear

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  • Wall Street Breakfast: Must-Know News
    The Wall Street Journal reported that General Growth Properties and Simon Property Group are planning to sell shares to raise cash, which would dilute current share holders value. This is comparable to a recent experience in England. The press reported that cap rates in England were lower than mortgage rates and the REIT was forced to sell shares to raise cash for redemption's.

    In looking at the balance sheet of Simon Properties, the long term debt was reported to be $19 billion in real estate which was financed with $17 billion in long term debt. I question the terms of the long term debt. It has been reported that 59% of the mortgage debt for commercial properties was interest only! Further raising doubt is the report by Mood's that the loan to value ratio was typically 110% or more.

    So, the reason for the sale of shares may be that the interest only loans at substantially interest rates have caused a problem for Simon.
    Mar 26 00:41 am |Rating: 0 0 |Link to Comment |View article

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