US REITs are all set to go on a buying spree in 2012 according to experts. Data from the National Association of Real Estate Investment Trusts shows that REITs raised a record amount of equity in 2011. The body reports that REITs issued $37.5 billion in initial and additional common and preferred shares last year. This not only represents a 32% growth compared to 2010, but also the largest amount of REIT stock issued since the securities were established in 1960.
With most trusts now recapitalised and profitable and the low price environment, bankers and brokers believe that this equity will go into acquisitions.
This year was supposed to be a big year for acquisitions, but deals were suppressed by the US downgrade and the lingering European debt crisis-cloud. And it was a big year; in 2011 REITs bought $34.6 billion worth of commercial real-estate in 2,322 deals, according to CoStar Group. This is a 40% increase on 2010, but still short of expectations.
We are off to a good start this year. With positive data on consumer spending, the labour market and the declining likelihood of a double dip recession, confidence is growing and with it appetite for risk and investment in shopping malls, office buildings and apartment buildings, with the latter being particularly strong at the moment as the US rental sector booms.
Ventas Inc - one of the nation's largest health-care landlords by market capitalization - is all set to get 2012 off to a flying start, having just agreed to buy Cogdell Spencer Inc. in a deal that Ventas valued at about $760 million, including debt. This would be the largest REIT merger since February last year, when Chicago-based Ventas Inc acquired rival Nationwide Health Properties Inc. for $5.8 billion.
Asset management firm Carlyle Group are also set to give a good kick in 2012, having just announced that it has raised $2.34 billion for its sixth US real estate fund.