07/03/2013 | by Allen Kenney
Banker Says Market Conducive to More CMBS

Guy Metcalfe, managing director with Morgan Stanley, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

With CMBS delinquency rates falling, Metcalfe discussed the implications of the trend for further CMBS issuance.

“I think, on the margin, it may have a positive impact,” Metcalfe said. “What will have a bigger impact on issuance going forward is just the overall state of the real estate industry and the demand for debt capital, in particular. I wouldn’t call it so much pent-up demand, but there is an enormous amount of demand for yield. I think people are searching for yield and looking at real estate as a great place to find yield. You don’t have to search too much farther than the CMBS market or other types of debt for real estate and say that’s a pretty good risk-adjusted return.”

Metcalfe expressed surprise at the limited number of REIT-to-REIT mergers and acquisitions since the Great Financial Crisis.

“At any point in time, there are triggers that suggest there should be more M&A, or less M&A, as the case may be,” he said. “I think there are a number of triggers that suggest there should be more M&A, but I think there are also some impediments to M&A. Once the impediments to M&A subside or go away, there will be more activity.”

Metcalfe offered his outlook on the market for initial public offerings and the characteristics that these companies might share.

“I think we’re actually going to have a bit of a barbell approach in the IPO space,” he said. “I think we’re going to see some large companies—very well-run companies, large platforms that in many cases were subject of being taken private or out of the public markets a number of years ago. We’re going to see some activity out of a number of sponsors for large, well-run companies. I think we’re going to see that on one bookend. On the other, if you look at the companies that have come public in the last six or 12 months, they’ve not been large companies.”