More Big REITs Possible

CHICAGO—On Monday morning, at BMO Capital Markets' 10^th Annual North American Real Estate Conference in Chicago, the leaders of a few major REITs gathered to discuss the future of these companies, and covered a lot of ground. One thing the panelists seem to agree on was that there are too many REITs.

“There should be consolidation in the business,” said Sandeep Mathrani, chief executive officer of General Growth Properties, adding that there was currently too much choice. However, that does not mean he is against the occasional spin-off. If done in a thoughtful manner, spinning off a REIT “can be a tool to highlight the value in that organization” which otherwise would be hidden if it remained a small part of a big company.    

John Kim, a managing director of US REIT Research, BMO Capital Markets, and moderator of the discussion, then asked Debra Cafaro, chairman and chief executive officer of Ventas, whether she thought we would have more or fewer REITs in the next few years.

“I always say fewer and I'm always wrong,” she replied. “We've acquired many companies over the years and more keep popping up.”

Kim then asked her if she thought we would soon see more $50 billion REITs. Cafaro thought so, and said that the advantages of scale and diversity are quite high. So much so that REITs of $50 billion to $100 billion were still possible.

The panelists also touched on the impact of e-commerce, a topic raised by many participants at the conference. Mathrani echoed the general sentiment when he said that the cost of distribution was hurting strictly online sellers, but since many consumers now like shopping online and picking the products up at an actual store, “online retail is an incubator for our bricks-and-mortar real estate.”