Prior to IPO, REITs Must Make Long-Term Governance Plans

4/1/2011 | By Matthew Bechard

James J. Hanks, Jr., partner with Venable LLP, said he expects transaction activity in the REIT industry to continue at a steady pace. Hanks spoke to while attending REITWise 2011: NAREIT's Law, Accounting and Finance Conference in San Francisco last month.

In particular, Hanks said that with REIT share prices being much higher than they have been in recent years, REITs' acquisition currency is much more favorable than it has been in a while.

Hanks added that REITs are also active on the deal front because they have been able to raise capital through equity and debt offerings.

There are a lot of expectations about the size of the potential REIT initial public offerings that may come to market in 2011. While he declined to speculate as to how big the IPO pipeline might be, Hanks said the fact that REITs are trading at high prices and high multiples makes an IPO very attractive right now.

"A lot of real estate got privatized over the last several years. That real estate is still there in private hands, and a lot of those private holders of real estate may be looking for liquidity opportunities in the near term," Hanks said."

While companies tend to focus most of their attention leading up to an IPO on the offering itself, Hanks said it is important that companies plan further out.

"It is very important that companies think about how they want their company to look from a corporate governance perspective after the closing of the IPO," Hanks said. "There are a lot of features that people will say that company should or should not have to get the IPO done, but after the IPO is over the company may be exposed to hostile activity in the corporate control market."