Recent Commercial Real Estate Deals Point Toward Market Recovery

Investors aren't showing much interest in new initial public offerings by REITs, according to Murray McCabe, global co-head of real estate investment banking with JPMorgan Securities.

In a REIT.com video interview at REITWeek 2011: NAREIT's Investor Forum at the Waldorf=Astoria in New York, McCabe discussed the current state of the capital markets for REITs, as well as the potential for more deal-making in the second half of the year. He noted that the markets haven't been receptive to IPOs, calling the performance of REITs that went public in 2009 and 2010 "disappointing."

"The public markets are very selective today about what they will invest in," McCabe said. "Obviously, they have a wonderful slate of existing companies that are great quality management teams, great quality assets. It's really choosing between that and a new candidate coming into the market."

McCabe rebutted the notion that deal-making activity in the commercial real estate market has fallen short of expectations. He said he has been "pleasantly surprised" by the number of transactions that have taken place throughout the industry, pointing to deals such as the merger between AMB Property Corp. and Prologis (NYSE: PLD) and Ventas Inc.'s (NYSE: VTR) pending acquisition of Nationwide Health Properties Inc. (NYSE: NHP).

"On the corporate side, we certainly have seen a tremendous amount of activity that I think was probably not expected," he said. "That's a good sign for the market recovery."

McCabe also said he is anticipating that private market sales will pick up. He noted that deals in the office market are expected to come at a faster pace. Meanwhile, transactions in the multifamily sector have remained steady in the last 24 months, according to McCabe.

McCabe also predicted more public-to-public deals will take place in the second half of 2011. While acknowledging that the major transactions so far this year have required "very specific ingredients," McCabe said he still expects consolidation to occur among public companies.

"Maybe not at those size levels, per se, but definitely we think we'll see more of that in the back half of the year and early into next as the recovery takes hold," he said.

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Recent Commercial Real Estate Deals Point To Market Recovery

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