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‘Lessons Learned’ Ensures US REIT Liquidity Won’t Get Burned

November 18, 2016

‘Lessons Learned’ Ensures US REIT Liquidity Won’t Get Burned

November 16, 2016 | by Steven Marks | Commercial Property Executive

By Steven Marks, Managing Director & Head of U.S. REITs, Fitch Ratings: After a few difficult months, U.S. equity REIT liquidity has improved. Here’s why.

Steven-Marks_800x600Following a difficult few months, U.S. equity REIT liquidity profiles have improved meaningfully year-over-year, thanks to a “lessons learned approach” from previous down cycles.

This improvement comes after a slow start to 2016 for REIT capital issuance, and particularly common equity issuance. Equity REITs were hampered by depressed valuations in comparison to net asset value. Overall issuance during the first quarter of this year was down by more than 25 percent compared to the first quarter of 2015. Additionally, specialty REITs focusing on cell towers, data centers and student housing accounted for more than half of total issuance, highlighting the difficulties of the major property types as they sought to access capital early in 2016. Since the second quarter, however, equity valuations have recovered, and overall REIT capital issuance through September has surpassed the total through the same time last year.

Major equity REIT property types are benefiting from a resurgence in common equity valuations and the global demand for positive-yielding debt. Retail REITs have been especially active, leading all property types in total issuance for both the second and third quarters to date. In fact, retail alone is responsible for more than a quarter of aggregate issuance since April 2016.

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More on Liquidity from Blue Vault

July 2016 (Blog)  Transparency & Liquidity in the Nontraded Space: What’s Hot, What’s Not

In the News:

MVP REIT and MVP REIT II Engage Ladenburg Thalmann & Co. to Assist with Strategic Alternatives and Stockholder Liquidity

KBS Realty Eyes Possible Liquidity Events for 2 Non-Traded REITs

From the Vault:

The full-cycle event by a nontraded REIT in 2015 that created the most estimated common shareholder liquidity was Apple Hospitality REIT, which was created by a merger of Apple REITs Seven, Eight and Nine. The listing created approximately $3.3 billion in shareholder liquidity.

Over $10 billion in shareholder liquidity was created by the full-cycle events among nontraded REITs in 2015.

In 2015, three nontraded REITs increased their distribution yields and two nontraded REITs suspended distributions in anticipation of liquidity events.

Four nontraded REITs have merged with other companies since December, 2014, resulting in liquidity for common shareholders totaling an estimated $8.6 billion.

Blue Vault has released three editions of its Nontraded REIT Full Cycle Performance Study. The fourth will be released this month. The first contained 17 NTR liquidity events with an average IRR of 10.33%.

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James Darren Roberson
August 22, 2017 at The National, the annual NPH Educational Conference
August 28, 2017

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