UNITED STATES - The National Association of Real Estate Investment Trusts' annual convention in San Diego last week confirmed there is serious concern about the future of the REITs market in the current climate and how that will play out over the next couple of years.

Public REITs in the United States face a difficult market in 2009, according to speakers, especially as the value of REITs have dropped by 40% in the last month alone.

Yet conditions could be even worse for some offerings as a significant amount of debt is going to mature over the next 24 months and it is unclear where financing will then come from, according to Mark Streeter, managing director at JP Morgan Securities.

"In the REIT universe, $35bn (€27.1bn) of debt is going to be maturing over the next two years.  The big question is going to be who will fill in the gap. There are now no sources of capital for new lending in the industry," said Streeter.

With traditional sources of capital now unwilling to come to the market, such as banks, life companies and pension funds, there is also still no real indication as to when any investors can return because they all have their own financial issues to deal with.

US life companies, for example, have lost 40% of their market capitalisation this month and pension funds are now dealing with falling total plan asset values as the returns on their equities and stock market portfolios have dropped significantly.

The end result is many REITs might not make it through this difficult time, according to some delegates, while those which do survive will do so because they have either managed their assets well or are able to work out a deal with an existing lender to extend the terms on a loan.

That said, not everyone believes there is a need to panic as David Simon, chairman of Simon Property Group - a player in retail property - said: "There is panic all around us. But I'm not one who is ready to panic. We still have tenants in our retail properties and will continue to have them in the future. The amount of customer traffic going through our properties is still okay," said Simon.

It's not all bad news however, as one property types within REITs which is still attracting new debt is said to be apartments, largely because Fannie Mae and Freddie Mac are still in business, suggested Ric Campo, chairman of Camden Property Trust.

"We are seeing this first hand. Our company recently struck a deal with lenders for $380m of new debt. We feel fortunate that Camden can attract new debt, given what is going on with the rest of the industry."

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