Signs of Life in 2Q as Sales Volume, Capitalization Jump

Despite overall sales figures down double digits from last year, transactions are still move forward, albeit in smaller amounts. Another good sign of real estate activity is the re-equitization of the REIT industry that continued in May as more companies deleveraged their balance sheets with equity capital raised in the public markets. Thus far in the second quarter, Tulsa-based net leased sale broker Stan Johnson Co. closed 13 deals, as compared to nine deals the entire first quarter. The company recently completed the sale of a 5,900-square-foot free-standing medical property leased 100 percent to Fresenius Medical Care, located in West Salem, Ore. Medical tenants are among the few tenants nationally that continue to expand in the face of the recessionary economy and a niche that will show continued strength in the coming year, said Michael Cropper, a senior associate at Stan Johnson Co., which represented the seller, MDG Development Group. Massey Knakal managing director Kyle Mast told CPN on May 28, said he’s “confident moving forward in 2009 that sales volume will pick up. I don’t think it will get worse than it was in the first quarter because of the historical data over the last 25 years. I believe things will turn around. The only place to go from here is up and we’ve had an increase in contract execution in our office over the last one and a half months.” As far as REITs go, information from the National Association of Real Estate Investment Trusts show there have been 45 secondary equity offerings in the REIT industry in 2009 through May 31, which have raised a total of $14.2 billion. In May, 18 secondary equity offerings raised $5.3 billion. To date, 34 percent of the companies in the FTSE NAREIT All REIT Index have issued secondary offerings in 2009. By comparison, there were 76 secondary offerings in all of 2008 raising a total of $14.5 billion, according to NAREIT. REIT share prices historically lead direct commercial property values by approximately five quarters, and the trough in the current market cycle may have been reached in early March. REIT shares fell 75 percent from the industry’s peak in February 2007 through March 6 of 2009. But from March 6 to today, equity REITs are up 58 percent. REITs posted positive returns for a third-consecutive month in May, led by double-digit gains from Lodging and Commercial Financing REITs, according to NAREIT statistics.