Goldman Sachs Banker Expects Rise in REIT M&A

Mike Graziano, managing director with Goldman Sachs, joined REIT.com for a video interview at NAREIT’s 2015 Washington Leadership Forum.

Graziano said the rise in the number of REITs pursuing investment-grade ratings “makes a lot of sense.” He pointed out that an investment-grade rating allows for “instant and immediate access to capital.” Furthermore, it leads to a lower cost of capital.

“In a pretty competitive world on the acquisition front and on the return front, having access to capital and having a lower cost of capital are pretty important weapons for REITs,” Graziano remarked.

Regarding equity offerings from REITs, Graziano said the level of activity has surprised him. Low oil prices and interest rates, coupled with healthy share prices, have motivated more companies to tap the capital markets, he said.

On the other hand, the mergers and acquisitions market was “very quiet on the heels of the financial crisis,” Graziano said. That started to change late in 2014, and M&A conversations have heated up to start 2015.

“Dialogue does not always equate into transactions, but I think you are going to see a pretty robust M&A environment in 2015,” Graziano said. “There are a lot of people thinking through strategically where they want to be in the next three or four years. There will be a lot of that dialogue taking place.”