Fitch Analyst Says Market Ripe for REIT Privatizations

In the latest episode of the NAREIT Podcast, Steven Marks, managing director with Fitch Ratings, offered his thoughts on the potential for stock exchange-listed REITs being taken private.

Fitch Ratings released a report earlier this year noting that conditions in the REIT market currently resemble those of the last privatization wave in the 2000s. Marks pointed out that private equity shops and other potential REIT acquirers have been building up “tremendous” capital reserves. Additionally, he said the revitalization of commercial mortgage-backed securities provides another potential source of capital.

In addition to private equity firms, Marks cited sovereign wealth funds as potential REIT acquirers. These large foreign investors have taken aggressive stances toward buying real estate assets in the United States and globally, according to Marks. With European funds facing low yields on properties in Europe, they could step up privatization bids, he said.

Are publicly traded REITs receptive to offers to go private in this environment? Marks said that tends to go on a case-by-case basis.

“These are all board decisions, and boards have a lot to consider in terms of pursuing a strategic alternative—one of which may be staying a public company and rejecting or moving on from any potential privatization offers,” Marks commented. “Generally, our view is that boards are always receptive to considering any transaction that they think maximizes shareholder value.”

(Subscribe to the NAREIT Podcast via iTunes.)