Jeff Horowitz, global head of real estate, gaming and lodging at Bank of America Merrill Lynch, joined REIT.com for a video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.
Horowitz gave an overview of REIT capital market activity in 2014. According to Horowitz, REITs have raised about $55 billion this year, comprised of $25 billion in equity, $2 billion in preferred stock and the remainder in unsecured debt.
Horowitz explained that issuance in 2014 has been supported by a backdrop of low interest rates, greater volatility in non-REIT products and strong underlying growth in REIT fundamentals.
“When our clients have good growth and their stocks trade around net asset value, they try to finance things that are long in the interest rate environment that we have, and they’ll raise equity. I think we’ve had a pretty good backdrop and a pretty good year,” he noted.
Meanwhile, Horowitz said the lower level of initial public offering (IPO) activity in 2014 compared with 2013 should be viewed in a historical context.
“You’ll find that over the last 20 years, there have been four or five periods when there have been many more IPOs than others. Last year was one of those years,” he said.
Horowitz noted that many companies that have wanted to go public have already done so. Others that were considering IPOs have refinanced their portfolios, given the favorable interest rate environment, he said.
“As we look forward, I think you’ll see that we’re in a normalized environment and a healthy one. It’s just that the bar will be a little bit higher, given the quality and number of companies we have in existence already,” he said.
However, Horowitz added that “the market is wide open” for companies that wish to conduct IPOs, so long as they can demonstrate a good management team and business plan, as well as scale and liquidity.