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Activist Shareholders Could Push for More REIT Deals, Cicco Says

06/20/2014 | By Allen Kenney

Marty Cicco, senior managing director with Evercore Partners, joined REIT.com for a video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.

Cicco discussed the future of the single-family housing sector and the possibilities for more initial public offerings (IPOs) in the group down the road. Cicco said he believes the proliferation of single-family REITs is likely to be a “short-term phenomenon.” He indicated that the challenges of operating a single-family residential portfolio could deter new entrants from coming into the marketplace.

“The single-family opportunity clearly came out of the crisis,” he said. “Clearly, [the single-family housing REITs] have all made relatively smart asset investments because there has been appreciation, but it hasn’t come without a lot of difficulty of renovating a lot of individual homes and really determining if they could be run efficiently in the markets that they are in.”

Cicco also described the challenges of evaluating a new REIT sector that falls outside of the standard industry property types. He noted that his history with new REIT offerings dates back to the time when he oversaw the first two IPOs in the outlet mall sector. He emphasized the importance of teamwork and multiple perspectives when adjusting to a new sector.

“We struggled at that time to get our arms around the outlet business because it wasn’t a typical real estate formula, given that the locations were generally outside the metropolitan areas and the tenant base was a lot different,” Cicco recalled. “But over the past 20 years or so, we’ve been faced with a lot of challenges. It takes collaboration from an investment banking standpoint; sometimes it takes collaboration with different industry groups.”

Cicco said he feels the market for new kinds of REITs works efficiently despite the presence of a learning curve.

Lastly, Cicco weighed in on sectors that could be the most hospitable for mergers and acquisitions in the second half of 2014. He called the growth of activist investors “the great unknown” in making such projections.

“I would say the overall climate for activity is reasonably good,” he said. “Experience has taught me that M&A is not just about numbers, it’s about people as well. I think you may see some M&A activity that is really instigated or initiated by some activist activity.”