"Some think the Reit model has failed, but we disagree," says Mike Prew, real estate analyst at Nomura. "There appear to be some signs of the cycle reaching a market bottom for top-quality assets, providing the leases are long enough to see through to the end of the rental recession."
The recent spate of has divided the Reit sector into the 'haves' and 'have nots'. The majors - , , and - have successfully accessed £2.7bn of restorative equity. is expected to follow suit with a rights issue or share placing in the coming weeks and the central London Reits - , and - are well capitalised and their shares have rallied this month.
But the jury is out on industrial property Reit , whose shares have collapsed 95 per cent in a year on debt fears. This week's were received scornfully by analysts. Fitch has placed the company on Rating Watch Negative, saying there is "major execution risk" associated with a share placement, and a rights issue seems impossible at the current price of 16.5p.
"The key event is what will happen when one of the Reits breaches loan-to-value covenants," says KBC Peel Hunt real estate analyst John Cahill. He believes that so long as increased interest rates can be serviced, lenders will not pull the plug.
"The banks can't sell property any easier than the real estate companies can, and they won't want it on their balance sheets," he says. "We are not a million miles off bottom. Real estate shares have always been a lead indicator, and once the bad news is out the way, we may well see a relief rally."
