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The equity issuance by Simon Property Group Inc. (SPG) and Alexandria Real Estate Equities Inc. (ARE) could inspire other real-estate investment trusts to execute similar deals.

As credit remains tight, selling equity is an effective tool for strong companies to raise funds to help pay down hefty debt while keeping balance sheet pressures at bay, analysts say. However, such deals are commonly dilutive to shareholders and could be expensive for companies particularly in weak market conditions.

Mike Kirby, an analyst at Green Street Advisors, noted that Simon Property's deal was an expensive venture for the nation's largest public REIT.

Simon Property announced Friday it priced 15 million shares at $31.50, an 8.4% discount to Thursday's closing price. The planned stock offering boosted shares outstanding by at least 6.6% and coincided with the sale of $500 million of senior notes.

The nearly $1 billion of proceeds expected from the offerings will be used to partially repay the $1 billion outstanding balance of its $3.5 billion unsecured credit line and for general corporate purposes.

Kirby said the pricing of the equity deal indicates that if Simon Property used the proceeds to buy properties, they would need a low price that would equate to at least a 10.5% capitalization rate, or the return in the first year as a percentage of investment.

Higher cap rates usually indicate greater investment risk and/or an increase in return requirements.

"That's a much higher cap rate than anybody's ever thought about applying to Simon's property portfolio. It's a strong statement by them that they believe things could get tough," he said.

Alexandria Real Estate on Thursday offered seven million at $38.25, below Wednesday's close of $41.77. The offering, which was initially set at 4.5 million shares, boosts shares outstanding by about 22% and should net the company $256.4 million from the deal.

Following the two deals, the market's thinking "it's the tip of the iceberg," said Rich Moore, an analyst at RBC Capital Markets.

He said part of the reason why so many REIT shares are posting declines this session is that investors are thinking they should not be long on these stocks in case of rising equity issuance.

Indeed, Alexandria Real Estate's shares closed Friday down 12% to $32.82, while Simon Property's closed down 4.6% to $32.80. Among other REITs, shares of Boston Properties, Inc. (BXP) ended the day down 11.5% to $34.90, while SL Green Realty Corp.'s (SLG) stock finished down nearly 16% to $10.37. Such declines are also in line with broader market weakness.

"Virtually every REIT has a leverage ratio that's too high right now," said Green Street's Kirby.

"The good ones like Simon are still able to access capital, albeit very expensive capital, and bring their balance sheets back into decent shape. So they cannot only survive but also take advantage of opportunities," he said.

He expected that in the next six months, the vast majority of the equity issuance will be done by stronger and mid-tier REITs.

-By A.D. Pruitt, Dow Jones Newswires; 201-938-2269; angela.pruitt@dowjones.com