After 2016’s first quarter, real estate investment trusts (REITs) are selling nearly four times as much as they’re purchasing in an effort to raise cost effective capital.
REITs own and often operate income-producing real estate, allowing both small and large investors to acquire ownership in real estate operating companies on a very tax favored basis. In general terms, investment strategy is focused on core-portfolio markets and building scale within those markets.
Market volatility and decreased share values combined with strong property fundamentals and yield spread compressions are driving REITs to re-evaluate portfolio composition. Many are pursuing strategic dispositions of assets they believe to be non-essential to their overall strategy in order to right-size and secure a stronger cash flow stream.
This is most notably occurring in the form of public-to-private transactions and portfolio sales across all property types, with the office and multifamily sector accounting for the bulk of activity.
“Given current capital markets fundamentals and the amount of institutional private equity dry powder, the time to sell remains strong in 2016,” says JLL International Director David Doupe. “Market fundamentals remain strong and increased property valuations and rental rates are encouraging office dispositions, while multifamily portfolio sales tripled year-over-year, with REITS acting as the net sellers. Pricing is favorable, particularly in secondary markets and for non-core assets many of which benefit from the available of cheap financing.”
Read more in Pensions and Investments by Arleen Jacobius
International Director, JLL