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Cicco: Still Opportunities for Consolidation in REIT Market

06/14/2013 | By Allen Kenney

Marty Cicco, senior managing director with Evercore Partners, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Cicco discussed the possibility that more iconic properties end up being held publicly, as the Empire State Building in New York is slated to be. He noted that the recent sell-off in the REIT market may discourage some companies from going ahead with plans to hold an initial public offering (IPO).

“I’m not sure that the iconic part of the real estate aspect will drive more companies trying to get to the public marketplace,” Cicco said. “I think iconic real estate will always have a place in the public market, but also will still have very strong market holdings in a private form as well.”

Cicco was asked about any potential signs of major transactions percolating in the REIT market.

“Obviously, in our side of the world, we’d like to see more activity,” he said. “You’ve seen a lot of activity in the private REIT sector, in that you have a number of companies that are being forced to list. And a couple of the existing companies have quite acquisitive over the last few months, both on a friendly and a hostile basis. I think health care has some more consolidation left. If one thing came out of the crisis, you did see for the first time in the history of the REIT sector much more of a bifurcation between the winners and losers, so you do have some significant multiple spread or gap between the top-tier companies and the lower-tier companies. We think activity will pick up, but I’m not sure anything will hit the major category. I think each sector has the ability to have some further consolidation.”

Cicco offered his opinion on the impact of the Federal Reserve’s monetary policy on REITs and their cost of capital. Fed Chairman Ben Bernanke indicated in May that interest rates could begin to start creeping back up in the near future.

“I would suggest that the last two weeks have been a knee-jerk reaction, not just within the REIT sector, but the markets broadly,” he said.