CHARLOTTESVILLE, VA—US REITs turned to at-the-market programs for capital raising with a vengeance between Q1 and Q2 this year, according to SNL Financial. US equity REITs raised a total of $1.08 billion through these hybrid structures in the second quarter, up roughly $478 million, or 80%, from the 2014 first quarter, in which $600.6 million was raised.

Once relatively rare, REITs have been at-the-market programs with growing frequency; the activity over this previous quarter highlighting just how popular they can be depending on what is happening in the larger market.

AvalonBay Communities raised the most capital through at-the-market offerings during the second quarter, completing nearly $200 million in common equity and accounting for nearly a fifth of the total amount raised in the second quarter by US equity REITs, SNL found.

Duke Realty sold the second-largest dollar amount through an at-the-market offering during the quarter, raising $169 million through its ATM program, which it launched in 2013. Other REITs that have new programs include EastGroup Properties, which reported in a February prospectus that its proposed offering price for the program equals $607 million.

However, it would be a mistake to conclude that REITs are rushing to set up these programs. In fact, SNL notes that as of Sept. 18, 24 US equity REITs had announced at-the-market offering programs in 2014, compared to 34 REITs over the same period in 2013.

There are a number of reasons why a REIT would set up an ATM program, starting with their ability to perform in periods of volatility. If the market is volatile, a REIT might find it difficult to complete a traditional follow-on offering, but an ATM would be easier to complete. This year the capital markets have been relatively calm for REITs.

ATMs' flexibility is another reason why the structure appeals to REITs—basically it allows them to raise capital when prices are favorable.

Instant Insights /

REITs' ATM Capital Raising Surges 80% in Q2

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