Lawyer: Portfolio Discounts Holding Back REIT IPOs
04/21/2015 | by Allen Kenney

Mark Van Deusen, partner with the law firm Hunton & Williams LLP, joined REIT.com for a video interview during REITWise 2015: NAREIT’s Law, Accounting and Finance Conference held in Phoenix.

Van Deusen discussed some of the factors driving the market REIT initial public offerings (IPOs). First, he pointed out that portfolios in REIT IPOs traditionally face a discount. That creates an impediment, Van Deusen said, especially in environments in which capital is flowing into the real estate market from private sources.

Furthermore, the growth of spinoffs has muted demand for new stock exchange-listed REITs, according to Van Deusen.

“The desire for new niche REITs is being met in large part by the spinoff market,” he said. “That has depressed the vitality of the IPO market.”

With regard to the emerging sector of infrastructure REITs, Van Deusen said the REIT approach to real estate investment is well suited the sector. He called the InfraREIT IPO (NYSEHIFR) a “game changer” in that regard.

“What REITs have been able to do, historically, is to bring capital to areas of the real estate market that needed it,” he said.

Reforming the Foreign Investment in Real Property Tax Act (FIRPTA) deserves more attention for the industry, according to Van Deusen. He called the FIRPTA rules “a huge impediment to bringing foreign capital to the U.S. real estate market.”