S&P Analyst Expects REIT Capital Raising to Slow in 2018

Keven Lindemann, senior director of global real estate at S&P Global Market Intelligence, joined Nareit for a video interview at REITworld 2017.

Lindemann described 2017 as a “surprisingly active” year from a REIT capital raising perspective, given the level of economic uncertainty.

While the breakdown between senior debt to common equity in 2017 has been fairly consistent with last year, Lindemann said, much of the capital raising activity has been concentrated within communications and data center companies. In fact, Lindemann noted that about 10 percent of the capital raised this year has come from one company alone - Crown Castle International Corp. (NYSE: CCI).

Lindemann said he thinks it will be difficult to sustain the current pace of capital raising in 2018. “A lot will depend on whether the companies can identify growth opportunities,” he said. Furthermore, equity valuations have been lower recently, Lindemann noted, which is likely to further constrain capital raising.

Meanwhile, Lindemann observed that interest rates continue to play an important role in driving REIT share prices. He also highlighted the general shift toward funds flowing into passive investments.

Looking to 2018, Lindemann said he expects environmental, social and governance (ESG) issues to become increasingly important for REIT investors and lenders. At the same time, the impact of rapidly changing technology will increase, he observed.