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BMO Analyst Says Capital Markets Receptive to REITs

06/30/2014 | By Sarah Borchersen-Keto

Paul Adornato, managing director with BMO Capital Markets, joined REIT.com for a video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.

Adornato reviewed the conditions that REITs have faced within the capital markets so far this year.

“The capital markets have been open for the REITs both on the equity side and on the debt side,” Adornato stated.  On the equity side, large follow-on offerings have occurred this year, he said, in addition to a number of initial public offerings (IPOs).

“The capital markets have been receptive,  and investors have been receptive to looking at new REITs and putting new money to work in the REIT sector,” Adornato said.

Adornato was asked whether REITs have been able to build off the strong operating performance they demonstrated last year. He said the strong end to 2014 has carried over into 2014 across most property types

He noted that REITs are reporting strong underlying demand from tenants and favorable operating conditions due to a lack of new construction: “This is a very good operating environment if you are a property owner and if you are a developer as well because there’s limited competitive development.”

While development has been muted, Adornato cautioned that an influx of capital can sway the balance toward overbuilding “very quickly.”

“There’s a lot of smart money out that there that is, I’m sure, noting the favorable operating environment, so we just want to make sure that development remains restrained, or at least keeps up with demand on the part of tenants ,” he added.

Adornato also plans to  keep an eye on the acquisition environment  for the remainder of 2014.

“Since REITs do have access to capital, we just want to make sure that the spread they’re able to achieve on new acquisitions remains healthy,” Adornato said.