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Nearly 40 million Americans invest in REITs

Banker Discusses Factors Behind REIT IPO Uptick

12/11/2013 | By Allen Kenney

Jeff Horowitz, global head of real estate, gaming and lodging with Bank of America Merrill Lynch, joined REIT.com for a video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.

Horowitz was asked about the number of initial public offerings (IPOs) held in the REIT market in 2013.

“If we were sitting here a year ago, we knew a few things,” he said. “First of all, REIT IPOs don’t happen overnight, so we had an active pipeline and a shadow pipeline. From a demand perspective, we knew that certain things were very positive for us. REITs had performed very well for a number of years, so valuations were pretty good. Funds flow was very robust. And we had a lot of new investors joining the sector.”

Horowitz talked about the IPO market from the supply side as well.

“From a supply perspective, we also had a number of good things going on,” he said. “First of all, we had a lot of niche sectors that were about to grow and expand. We also had situations, like roll-ups, that were taking place for a long period of time. And we also had companies that went private in [2006 and 2007] or during the downturn. We knew all those companies were out there and about to come out. Fortunately, the stocks have performed well, so that has been a very positive outlook for us and will continue to be. One thing that is not in the numbers but is also significant to talk about is that a lot of the [public, non-listed] REITs listed, so that’s another part of our sector of new companies that exist today that didn’t.”

Horowitz also discussed the outlook for more IPO activity.

“I’ve been saying for a number of years that we’re basically in a bit of a mature sector,” he said. “Every year, we’ll see a handful of IPOs, we’ll see some M&A and those sorts of things with certain aberrations. This year, the pipeline is much smaller. On the flip side, if we see some things, there’s a market that is wide open for it. Companies just have to be able to hit certain criteria.”

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