Apparently, there is an explosion in new equity offerings and even new debt offerings coming from the REIT sector. The Real Estate Investment Trusts are raising cash from investors while they can, and high-profile deals have already gotten done by Simon Properties (SPG) and Kimco (KIM).
There is an appetite from institutional investors to support high quality names across all five food groups: residential, commercial, retail, hospitality, and industrial. Investors are willing to take up to USD 100m chunks of fresh equity while asking for 5% to 9% discounts on common shares, underwriters said.
This part of the story is very interesting, the reverse enquiries: the demand for many of these new issues is actually coming from the investors themselves…
An increased flow of reverse enquiries from institutional investors are driving some of the recent equity deals, the sources said.
I don’t know about all of this. I suppose the healthcare reits probably make sense, as Obama is clearly going to support the industry with many of his programs and hospitals/ health clinics tend to be more defensive. To me, for an investor to put money into a hospitality (hotels) REIT, however, would require him to temporarily and willingly take leave of his senses.
The discounts are supposedly pretty juicy and the underwriters are merely doing their jobs, keeping up with demand.
That being said, I’m not showing any of these REIT offerings to my clients. There are still equivalent yields in other asset classes with less risk, in my opinion, and real estate in general is guilty until proven innocent in this environment.