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REITs Continue to Play Important Role in Real Estate
11/30/2011 | By Allen Kenney
Twenty years after the start of the Modern REIT Era, the industry shows no signs of slowing down, according to Mark Decker, Sr., managing director with BMO Capital Markets and former NAREIT CEO.

In a video interview with REIT.com at REITWorld 2011: NAREIT’s Annual Convention For All Things REIT in Dallas at the Hilton Anatole hotel, Decker reflected on the growth of the REIT industry in the last 20 years and offered his thoughts on where the industry could be headed.

“I think the nature of the REIT industry points to the vehicle continuing to be an important part of U.S. real estate,” Decker told REIT.com. “It has a lot of credibility as an industry.”

Decker cited a host of positive aspects of the REIT approach to real estate investment that he says are working in favor of REITs. They include transparency and strong corporate governance. He also noted that REITs provide liquidity along with “excellent” yields and “safe” equity with limited leverage.

“I think all signs look very promising to me for the continued growth of the REIT industry,” he said.

In the near future, Decker said he expected transaction volume in 2012 to match that of 2011, which he described as “fairly typical.” While the initial public offering (IPO) market has remained dormant, the market for secondary equity offerings has been active, according to Decker.

“I think the M&A side of the business kind of ebbs and flows,” he said.

Decker speculated that the commercial real estate market stands to gain from “a more realistic value in the huge inventory of property that is kind of clogging the system right now.” He said there’s as much as $2 trillion in property inventory now waiting to change hands. He also said the general lack of capital is holding the market down.

“There’s clearly a dearth of capital to support IPOs and secondary equity offerings,” he said. “This scarcity of capital is a problem for the industry right now. In the efficient capital market theory, there should be a vacuum that capital flows into, and we haven’t seen that.”
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