REIT mergers and acquisitions (M&A) activity is likely to reach a record level in 2018 if it continues at the same pace seen in the first half of the year, according to panelists on a Bloomberg Intelligence webinar, The Rising Tide of REIT M&A: What’s Behind the Wave?
Calvin Schnure, Nareit senior vice president for research & economic analysis, said for the majority of deals, M&A activity underscores the health of REIT operating fundamentals overall. With no sign of a cyclical downturn in sight, companies have a “green light” for continuing their business plans, he said.
Panelists attributed a portion of the upsurge in M&A activity to the fact that some REITs continue to trade at meaningful discounts to net asset value (NAV). The record amount of capital waiting on the sidelines, and frustration among management teams and shareholders regarding share price levels, are additional factors behind the increase.
Lisa Lebow Kaufman, North America portfolio manager at LaSalle Securities, noted that the $65 billion of M&A activity seen so far in 2018 is more than for all of 2017.
“M&A in the REIT space is rational and likely to continue,” said John Ockerbloom, global head of real estate, gaming & lodging investment banking at Jefferies.
Schnure, meanwhile, noted that merger activity is not necessarily confined to those sectors where REITs are trading at a deep discount to NAV. Investor interest has also emerged in the industrial, self-storage and data center sectors, he said.
Schnure also pointed out that historically, acquisitions have been a more important element of asset growth for REITs than mergers. As Schnure noted in a recent market commentary, since 2011, REITs have made gross acquisitions of over $540 billion; REITs also sold some $250 billion of properties over this period, resulting in net acquisitions of nearly $300 billion.
(To listen to a replay of the webinar, please register here.)