Comments by: William J. Conti Partner Baker & Hostetler Washington, DC

Last week’s UpClose with American Ventures’ Philip Blumberg raised some interesting after-thoughts about the state and future of the REIT market, enough to prompt last week’s Feedback Poll on whether or not the Day of the REIT is past. Well, 75% of our respondents said no, that trusts, despite their current status as sitting ducks (to use Blumberg’s phrase) are here to stay. Commentator Conti–a Washington, DC-based attorney who heads up the firm’s business group–agrees. Here’s why:

“We’re seeing bigger REIT deals than we’ve ever seen before, and they’ve gotten some attention, but I don’t think it’s any more a reflection of the REIT industry per se than any kind of activity in any of the other industries. It’s a function of the fact that we have a very strong economy and there are a lot of sources of money. It’s relatively cheap. The stock market is good so stocks are highly valued. So, to the extent that you’re looking at acquirers who could use their stock as currency, that’s up.

“We’re also seeing more hedge funds getting into bigger deals and its all driving an overall acquisition and investment mentality. I don’t want to use a word like fervor or furor, because that’s too strong. But it’s a good M&A market, and people are looking around for deals and they’re looking in more places. I don’t think there’s anything terribly particular to the REIT industry that you’re seeing.

Are they sitting ducks? That’s right, but it’s right from the perspective of the big institutional investor. If that’s the dog of the stock market, the sub-clientele that REITs always have is the tail. They always have a big retail following. It’s not very glamorous or sexy. It’s not the guys that urban legend tells us sit in the closed room and control the stock market. It’s a lot of small investors who like their money there and like the idea of the returns they can get that beat what they can get from other conventional sources. REITs will always be appealing to them.

“To get back to your original question, like everything else in the stock market, REITs ebb and flow. They’ll always have a role.

“Will they ever have the glamour of the hottest new tech stock? Of course not. It’s more a tortoise-and-hare thing. If you were to assume the stock market will continue this way for ever, then REITs have a terminal problem. But if you believe this, I have this bridge in Brooklyn I want to sell you.”

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