Jones Lang LaSalle
REIT M&As Will Continue on Global Basis
By John Salustri
NEW YORK CITY-Mergers of REITs--most recently marked by Trizec's $8.9-billion buyout by a joint venture of Blackstone and Brookfield--will continue apace. But mergers--especially the much touted go-private variety--are all nothing more than a normal part of market dynamics, far from the doom-and-gloom predictions many naysayers are making about the market. What's more, expect the trend to go global before valuations begin to return the public market to more favorable status.
In the Privatization/M&A Trend, Macerich president and CEO Arthur Coppola noted that despite the buzz of privatization, "55% of the mergers last year were public to public. REITs can go private or they can go public. It's a healthy market dynamic."
Not surprisingly, the panelists, all of whom have had made recent merger news, agreed. While private valuations are a current impetus, "you could wait for a correction or you could take advantage of the market," said ING Clarion Partners chairman and CEO Stephen Furnary. "I wouldn't get my resume out and start sending them to the private side."
Mitchell Hersh, president and CEO of Mack-Cali Realty, took a more-for-me approach. "Capital flows will continue into the public markets," he theorized. "And since there are fewer companies, I see it as a positive."
M&As figured as well in a mid-morning session spotlighting the Asian REIT market. All panelists--Nicholas McGrath, executive director of Allco (Singapore) Ltd.; David Kivell, who heads property securities for Macquarie; and Yuichi Hiromoto, executive director of Japan Retail Fund Investment Corp.--agreed that M&As would trend upward in coming months. But they all agreed as well that the bulk of this activity would focus on, "the small guys, as Kivell put it, those "sitting out there by themselves."
It's no surprise that the Asian trust market has grown exponentially in recent years and promises to continue, albeit at a more mature rate. Nareit vice president Bonnie Gottlieb kicked off the session explaining that Asian REITs constitute a third of the Nareit/FTSE Global Index. But a maturing market means less dynamic returns, and the historic double-digit returns from Asia may soften to still-respectable but lower single digits.
Hiromoto--who manages the only retail-focused J-REIT--sees single digits in Japan's future, as does McGrath. Kivell expressed hopes for low-double digits in Hong Kong and China.
The state of flux overcoming the Asian market is evident as well in the regulations and structures underpinning those returns. Some of those trends promise higher yields with the loosening of restrictions on development in Japan and Singapore. But the opportunity is loaded with pitfalls, and Kivell labeled such a move "bold for first-time investor without a local partner."
Kivell and McGrath, both representing countries where external management rules, predicting a growing embrace in internal management much as in the US. Hiromoto balked at the concept, expressing his favor of the "increased transparency and removal from the asset manager," that internal management ensures.
Copyright © 2006 ALM Properties, Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited
REIT M&As Will Continue on Global Basis
By John Salustri
NEW YORK CITY-Mergers of REITs--most recently marked by Trizec's $8.9-billion buyout by a joint venture of Blackstone and Brookfield--will continue apace. But mergers--especially the much touted go-private variety--are all nothing more than a normal part of market dynamics, far from the doom-and-gloom predictions many naysayers are making about the market. What's more, expect the trend to go global before valuations begin to return the public market to more favorable status.
In the Privatization/M&A Trend, Macerich president and CEO Arthur Coppola noted that despite the buzz of privatization, "55% of the mergers last year were public to public. REITs can go private or they can go public. It's a healthy market dynamic."
Not surprisingly, the panelists, all of whom have had made recent merger news, agreed. While private valuations are a current impetus, "you could wait for a correction or you could take advantage of the market," said ING Clarion Partners chairman and CEO Stephen Furnary. "I wouldn't get my resume out and start sending them to the private side."
Mitchell Hersh, president and CEO of Mack-Cali Realty, took a more-for-me approach. "Capital flows will continue into the public markets," he theorized. "And since there are fewer companies, I see it as a positive."
M&As figured as well in a mid-morning session spotlighting the Asian REIT market. All panelists--Nicholas McGrath, executive director of Allco (Singapore) Ltd.; David Kivell, who heads property securities for Macquarie; and Yuichi Hiromoto, executive director of Japan Retail Fund Investment Corp.--agreed that M&As would trend upward in coming months. But they all agreed as well that the bulk of this activity would focus on, "the small guys, as Kivell put it, those "sitting out there by themselves."
It's no surprise that the Asian trust market has grown exponentially in recent years and promises to continue, albeit at a more mature rate. Nareit vice president Bonnie Gottlieb kicked off the session explaining that Asian REITs constitute a third of the Nareit/FTSE Global Index. But a maturing market means less dynamic returns, and the historic double-digit returns from Asia may soften to still-respectable but lower single digits.
Hiromoto--who manages the only retail-focused J-REIT--sees single digits in Japan's future, as does McGrath. Kivell expressed hopes for low-double digits in Hong Kong and China.
The state of flux overcoming the Asian market is evident as well in the regulations and structures underpinning those returns. Some of those trends promise higher yields with the loosening of restrictions on development in Japan and Singapore. But the opportunity is loaded with pitfalls, and Kivell labeled such a move "bold for first-time investor without a local partner."
Kivell and McGrath, both representing countries where external management rules, predicting a growing embrace in internal management much as in the US. Hiromoto balked at the concept, expressing his favor of the "increased transparency and removal from the asset manager," that internal management ensures.
Copyright © 2006 ALM Properties, Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited
posted by Jones Lang LaSalle NJ News Blog at 9:21 AM
<< Home