Morgan Stanley Banker Says Timing Not Right for REIT IPOs

Jackson Hsieh, vice chairman at Morgan Stanley, joined REIT.com for a video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.

In the March/April edition of REIT magazine, Hsieh said that while the market for traditional IPOs is still open, the bar is “very high.”  In the subsequent months the bar for REIT IPOs has only got higher, he noted.

With REIT indexes basically flat, investors aren’t making money on existing floated companies, Hsieh said.

“The bar to go public is even higher, and the discounts would be even wider. In our view, it’s not the right time for an IPO at this stage.”

The dominant story for REITs in 2015 has been the continued uncertainty surrounding interest rates, according to Hsieh. “That’s been the biggest dampener of peoples’ enthusiasm,” he said.

While the current picture on interest rate movements is clearer today, Hsieh noted that the recent crises in Europe may cause the push for increased rates to be put on hold.

Another big story for the REIT industry in 2015 has been the level of mergers-and-acquisitions (M&A) activity, according to Hsieh.

“I think every board right now is really looking at whether their business model is viable in this current environment. That dialogue and exploration is going to continue throughout this year and next,” Hsieh said.

While Hsieh said he doesn’t expect   a cascade of M&A transactions, he does “think they’ll continue to go at this constant pace.”