Debt Cuffs: Corporate Real Estate’s Riskiest Balance Sheets
Partner and Chair of Herrick’s Corporate Department, Morris DeFeo, was quoted in The Real Deal regarding the rising leverage of publicly traded real estate firms. The article notes that these publicly traded firms have been borrowing – some at record levels – which has caused concerns in the real estate market and in corporate America. Many of these firms rely heavily on debt to both fuel new growth or as a holdover from the last cycle. DeFeo stated that “lenders are competing so vigorously to win borrowers’ business in 2019 that it’s hard to remain disciplined when it comes to leverage.” Furthermore, DeFeo remarked that “[i]t’s kind of hard to say ‘no’ when somebody puts a pile of money in front of you with very loose covenants and very good rates.” The article notes that corporate debt rose in the fourth quarter of 2018, and that such heavy credit loads could be a ticking time bomb in an impending down market.