More Consolidation Coming in Health Care Sector
08/02/2012 | by Matthew Bechard

Look for more consolidation on the horizon in the health care REIT sector, according to John Brady, managing director with RBC Capital Markets and co-head of the firm's U.S. real estate group.

In a video interview in New York with REIT.com, Brady discussed his outlook on transaction activity in the REIT sector and the state of the capital markets.

"You see in the existing health care REIT asset portfolios that, generally speaking, growth is muted," he said. "They need to acquire assets to grow their business."

Because top-tier health care REITs are trading at higher multiples, the market is paving the way for accretive acquisitions in the sector, according to Brady. Additionally, Brady speculated that private owners seeking to create efficiencies have been motivated to sell off health care real estate assets.

Conditions in the industrial sector are challenging, according to Brady. "There's not a lot of growth and people are struggling to maintain occupancies," he said.

However, with industrial real estate assets trading at high cap rates, some investors are taking a more positive long-term view of the sector.

The mall sector is experiencing differentiation between its top and lower tiers, Brady added.

The capital markets for real estate will remain beholden to global economic conditions for the remainder of the year, Brady noted. He speculated that REITs will being to rely less on equity financing, as the deleveraging necessary following the financial crisis "has really been accomplished." He also said he expects to see an increase in REITs issuing corporate bonds in response to demand in the market and a decrease in the issuance of preferred stock.