Yoel Kranz, partner with the law firm Goodwin Procter LLP, discussed the latest trend towards consolidation in the real estate market in an interview for the latest edition of the NAREIT Podcast.
Deals made during the last market cycle tended to involve real estate assets being taken private, according to Kranz. Recently, transaction activity has been more "strategic," he said, and he cited the multifamily and health sectors among those seeing more consolidation in the current environment.
"What you're seeing is the reaction of market participants to very large REITs that have been formed in their sectors," Kranz said. "If you're a regional player and one of larger players in your sector has gotten even bigger, you feel compelled to make some moves of your own. Sometimes that results in you combining your operations with another regional player to form a larger platform."
Kranz noted that the deals are generally driven by valuations. When REITs' stock prices begin trading above their net asset values, it often sparks consolidation, he said.
Kranz also offered his perspective on the market's appetite for REIT initial public offerings (IPOs).
"The market is there" for REIT IPOs in the United States, said Kranz, pointing out some of the notable offerings of 2013. "There are opportunities for focused players, for large players, for players with tried and true portfolios."