REIT Transactions Rise in 2011

One of the dominant stories in the REIT industry this year has been the revival of the capital markets, according to Paul Adornato, managing director of research, BMO Capital Markets.

Adornato sat down with for a video interview at REITWorld 2011: NAREIT's Annual Convention For All Things REIT in Dallas at the Hilton Anatole hotel. He said the capital markets came back to life in 2011, providing well priced debt and equity for most companies that sought to tap those markets.

"We also saw the transaction market come back to life, with companies much more active in buying and selling," he said.

However, Adornato said that one of the most important stories has been that of supply and demand.

"Perhaps most importantly, we saw just basic supply and demand start to swing back in favor of the real estate owners and operators," Adornato said. "That is, even though there was very little new growth, the lack of new supply kept the overall operating dynamics reasonably healthy for most sectors."

Additionally, Adornato said there has been a lot of capital looking to buy properties. He said that income-oriented, core type investors are back, and this has provided a good opportunity for REITs to dispose of assets that may not be in their long term strategic plan.

Looking ahead, Adornato said he anticipates that 2011 will bring "more of the same," in terms of a general recovery.

"I think there's the potential for upside surprises if the economy turns out to be not as bad as the headlines seem to indicate today," Adornato said. "I think with all of the noise surrounding Europe and the presidential election, if that were to subside and folks were to look at the real economic growth, we might see a different picture and perhaps have a bit more confidence in the REIT market."

At the same time, Adornato also said that valuations price in a fair amount of optimism.

"But we're a little bit cautious so we'll see what happens," he said.