A recent analysis by SNL Real Estate found that property transactions by public REITs dropped significantly over the last five years--from 6,351 acquisitions and 2,812 dispositions in 2005 to 360 acquisitions and 994 dispositions in 2009. We spoke to Jason Lail, a senior analyst with SNL, to see if REITs, after the phenomenal levels of equity they raised last year, would give a repeat performance for 2010. More to the point, would they start buying and selling properties--especially given their slow record of the past five years?

GlobeSt.com: Can we break down these numbers? What is the reason for the decline?

Lail: Between 2005 and 2007, the primary drivers were mergers and acquisitions and privatizations. The high water mark for that period was Equity Office’s privatization in 2006. Past that point we start to see a decline in REIT pricing. But that was really REIT pricing dropping back to a normal level--the premiums at which they were trading started to decline. Then, of course, the debt and equity market dried up in 2008.

GlobeSt.com: So in other words, the market and the economy happened to REITs.

Lail: Yes.

GlobeSt.com: And then came the recession and the REITs’ recapitalization last year. What is next?

Lail: REITs recapitalized last year in order to right their ships and shore up balance sheets. This year, however, a lot of REITs have been socking away liquidity in preparation for property acquisitions. But those haven’t been happening either because, as you said, of the larger market.

GlobeSt.com: There is nothing good worth buying?

Lail: For the most part, yes. We are seeing some REITs that have raised a good chunk of liquidity but decide instead to continue to reduce debt on their balance sheet.

GlobeSt.com: Do you think this year will match or exceed the level of equity REITs raised last year?

Lail: No I don’t. The figures year-to-date do not point to that. As of May 31, there has been $7.89 billion raised in common equity. But I don’t want to give the impression that no acquisitions are taking place. I just meant there haven’t been as many as we had thought there would be. SNL data does show a rise in acquisitions in 2010--they increased 110.5% over the same period in 2009, ending April 30. Equity Residential led US equity REIT property acquirers with more than $770 million spent on asset acquisitions in the first four months of 2010, while Health Care REIT had the largest number of acquisitions at 31. Dispositions, though, have been quiet, dropping 72% in the first four months. Developers Diversified Realty Corp. had the most dispositions, with more than $455 million in sales through April.

GlobeSt.com: Can you talk about certain sectors or specific REITs and their performance?

Lail: Our data showed that the retail and healthcare sectors were hard hit, both registering the largest drop in property acquisitions. In the case of retail, it went from 1,720 in 2005 to 65 in 2009, which is a 96.2% drop. The healthcare sector fell 74.4%, from 402 acquisitions in 2005 to 103 in 2009.

GlobeSt.com: I’m guessing, at least in the case of retail, the larger economy had something to do with those declines.

Lail: Oh yes.