Healthy Pipeline of REIT IPOs

There's currently a "very strong pipeline" of REIT initial public offerings, according to Ron Bohlert, director of NYSE EuroNext's global client group.

In a video interview at REITWise 2012®: NAREIT's Law, Accounting & Finance Conference in Hollywood, Fla., Bohlert offered his insights into the equity capital market for REITs. More than a dozen companies have filed and are "active" in the planning process for a listed REIT IPO. Although the number of companies that will actually hold an IPO remains in flux, Bohlert noted that two already came onto the market in early March, a sign that activity could be strong in 2012.

"Fortunately, the market has been cooperating," he said. "We've had a nice rally since early January, and volatility is back to more manageable levels. So hopefully these two companies coming out will pave the way for more listings down the line."

In 2011, the REIT market witnessed a similar situation with what Bohlert termed a "robust" IPO pipeline. When all was said and done, however, the number of actual initial public offerings fell short of expectations. Bohlert attributed the limited number of REIT IPOs to the tsunami in Japan in the spring, the European credit crisis and the resulting U.S. credit concerns later in the summer.

"All of which created a very volatile and tumultuous market for the most part, which made it very difficult for IPOs to get out and price," Bohlert said. In spite of the challenges, Bohlert pointed out that seven REIT IPOs still made it to the market. REITs also had success with secondary offerings, raising a record $37 billion in fresh capital for the year.

"It appears that the uncertainty and volatility in the global marketplace did not have as much of an impact on the listed REIT community's ability to raise capital as one would expect," he said. "The low interest rate environment that has been prevalent for the last year—and appears to be the case going forward for a year or two—has led investors to search for yield. The listed REIT community is able to target that need and fill that demand."