$22.78B and Counting for REITs

CHARLOTTTESVILLE, VA-By most measures, publicly-traded REITs are doing well, two years past the financial crisis. The latest figures provided by industry association NAREIT, for example, show that US REITs nearly doubled their performance for the year to date ended May 31, compared with the broader equity market. Additionally, they outpaced the market in May and the preceding twelve months.

One of the sources of their strength is the ability to return, again and again, to the capital markets for funding. This year they are hitting them at higher levels, compared to the same period last year, according to new figures from SNL Financial. Namely, year-to-date through June 10, REITs have raised $22.78 billion, up from $18.38 billion raised during the same period last year.

Much of this year’s capital raising came from common equity offerings--specifically $11.57 billion. There was also $8.6 billion raised through senior debt offerings, $2.6 billion through preferred equity and $5.4 million through operating partnership units (OPU).

During the same period last year, common equity offerings totaled $8.31 billion, senior debt offerings totaled $9.55 billion, preferred equity offerings totaled $516.8 million and there were no OPU offerings, SNL reports.

Much of the funds raised this year are being used for acquisitions, now that more opportunities are coming to market, according to Elizabeth Juge, senior manager of product operations at SNL. 

“That is the driver behind a lot of these offerings,” Juge tells GlobeSt.com. “These firms want to position themselves to be ready for an acquisition opportunity."

Some the activity just this month illustrates her point. There were three common equity offerings: Equity LifeStyle Properties completed the largest transaction for $312.4 million on June 1. Digital Realty Trust closed a $173.8 million deal on June 7. And on June 10th, Gladstone Commercial completed a common equity offering for $21.1 million.

Proceeds from the funding, the REITs have said, will be used largely for acquisition, although there is some shoring up of balance sheets as well. Equity LifeStyle, for example, intends to use the proceeds to partly fund the pending $1.43 billion acquisition of a manufactured home community portfolio. Digital Realty Trust plans to use some of the proceeds to repay its revolving credit facility with an eye to acquiring additional properties and funding development. For its part, Gladstone Commercial will use its newly-acquired funds to both acquire additional properties, repay debts and for general corporate purposes.