Credit Suisse Banker says REIT Debt Markets Healthy as Ever
04/21/2014 | by Sarah Borchersen-Keto

Andy Richard, managing director of the Real Estate Group at Credit Suisse, joined for a video interview during REITWise 2014: NAREIT’s Law, Accounting and Finance Conference held in Boca Raton, Fla.

Richard was asked about the state of REIT capital markets and the prospects they face going forward.

“On the equity side, stocks are trading at very healthy levels. It’s a very seasoned asset class with a broad range of investors who are interested,” Richard said. On the debt side, he added, “I have never seen the debt markets healthier than they are now.”

Richard explained that REIT borrowers have a variety of opportunities available to them, ranging from the commercial mortgage-backed securities (CMBS) market to the bank and corporate bond markets.

He noted that the only question going forward is how REITs would use the proceeds. “Acquisition volumes have moderated over the last 18 months or so, and I think we’re all hopeful that they’ll increase, but that still remains to be seen,” Richard said.

Richard was also asked about his expectations for mergers and acquisitions (M&A) activity.

“It’s always hard to say because in my mind, M&A in real estate is usually driven by social issues – what does the management team, the CEO want to do with his or her business or his or her career at that point. Everything is situational,” he said.

Richard said he also anticipates seeing more investor activism.

“But is it a wave? I don’t really think so,” he said.

Turning to the conditions for REIT initial public offerings (IPOs), Richard noted that there is a healthy market for quality businesses that have good management teams and a strong growth story. “There will always be a strong bid for that, and there certainly is now,” he said. The story is a little different for “not-so-great portfolios,” he said, which are much harder to get public.”

Richard also added that valuations in the public market are not meaningfully higher, and in many instances are worse, than the private market: “That will limit some of the volumes.”