In spite of raising record amounts of cash through secondary equity offerings over the past year, publicly traded REITs will largely stay away from merger and acquisition activity in the near term, according to a panel at NAREIT’s REIT Week in New York City.
Perhaps having learned the lessons from the previous decade, when a large number of REIT mergers led to over-leverage and, in some cases, bankruptcy, today REIT managers view mergers and acquisitions principally as business decisions with serious long-term repercussions, rather than purely financial plays, these experts say.
As a result, in spite of having the capital to chase new deals, REITs will pursue only those transactions that make sense on a long-term and operational basis.
“I am not sure we’ll see [a high] level of activity,” noted Matthew Lustig, vice chairman of U.S. investment banking and head of real estate with Lazard Feres & Co. LLC, a financial advisory and asset management firm. “The market is driven by strategic transactions. Our view is there are certain combinations that will make sense, but it’s a strategic, not a financial decision.”
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