Thursday, April 22, 2010

US Reits seen bettering 2009′s US$25b share sales

They seek to acquire properties as confidence rises on economic recovery

Real estate investment trusts (Reits) in the US may exceed the US$25 billion they raised last year in share sales as an economic recovery boosts investor confidence, according to the industry’s main lobbying group.

The money raised in the stock market last year principally went toward improving balance sheets after companies became too highly leveraged, said Michael Grupe, executive vice-president of research at the National Association of Real Estate Investment Trusts. Reits will seek funds to acquire properties this year, he said.

‘We may see an uptick in IPO activity this year,’ Mr Grupe said in an interview in Singapore. ‘I think we will see existing Reits acquiring property as it becomes available.’

Macerich Co, a California-based shopping mall owner, took in US$1.2 billion selling 30 million shares in a secondary offering earlier this month. It initially planned to sell 18.5 million shares.

A report on Monday from the New York-based Conference Board signalled that the US economy will keep growing into the second half. The index of US leading indicators, which measures the outlook for the next three to six months, rose 1.4 per cent in March, the most in 10 months.

‘Retail spending and automobile sales are up, there is some sense that the economy is recovering,’ Mr Grupe said. The gains in the share prices of US Reits represent a ‘good indication that investors feel confident about real estate’.

The Bloomberg Real Estate Investment Trust Index that tracks 111 Reits has gained 11 per cent this year, after advancing 23 per cent in 2009. It fell 54 per cent in 2007 and 2008.

Reits in Asia may also seek to raise more funds for purchases after improving their balance sheets last year, said Mark Ebbinghaus, global head of real estate at Standard Chartered plc.

Source: Business Times, 22 Apr 2010

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