{"id":1004134944,"date":"2016-01-20T09:18:05","date_gmt":"2016-01-20T17:18:05","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004134944"},"modified":"2022-12-08T04:15:45","modified_gmt":"2022-12-08T12:15:45","slug":"reit-column-u-s-equity-reits-adopt-build-over-buy-strategy-for-2016","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/reit-column-u-s-equity-reits-adopt-build-over-buy-strategy-for-2016\/","title":{"rendered":"REIT Column: Equity REITs Adopt \u2018Build-Over-Buy\u2019 Strategy"},"content":{"rendered":"<p>By Steven Marks, Head of U.S. REITs, Fitch Ratings<\/p>\n<p><a href=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/Steven-Marks.png\"><img decoding=\"async\" data-attachment-id=\"1004130719\" data-permalink=\"https:\/\/www.commercialsearch.com\/news\/reit-column-the-pros-and-cons-of-reit-ization\/steven-marks-8\/\" data-orig-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/Steven-Marks.png\" data-orig-size=\"800,600\" data-comments-opened=\"1\" data-image-meta=\"{&quot;aperture&quot;:&quot;0&quot;,&quot;credit&quot;:&quot;&quot;,&quot;camera&quot;:&quot;&quot;,&quot;caption&quot;:&quot;&quot;,&quot;created_timestamp&quot;:&quot;0&quot;,&quot;copyright&quot;:&quot;&quot;,&quot;focal_length&quot;:&quot;0&quot;,&quot;iso&quot;:&quot;0&quot;,&quot;shutter_speed&quot;:&quot;0&quot;,&quot;title&quot;:&quot;&quot;,&quot;orientation&quot;:&quot;0&quot;}\" data-image-title=\"Steven-Marks_800x600\" data-image-description=\"\" data-image-caption=\"\" data-large-file=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/Steven-Marks.png?w=800\" loading=\"lazy\" class=\"alignright size-medium wp-image-1004130719\" src=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/Steven-Marks.png\" alt=\"Steven-Marks_800x600\" width=\"300\" height=\"225\" srcset=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/Steven-Marks.png 800w, https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/Steven-Marks.png?resize=300,225 300w, https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/Steven-Marks.png?resize=768,576 768w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>The drive for higher earnings is a constant for U.S. equity REITs, and\u00a0this year is no different. However, earnings will come less from acquisitions and more from development. While this \u2018build-over-buy\u2019 approach began in earnest last year, it will pick up steam in 2016.<\/p>\n<p>REITs are increasingly focusing on new development to drive earnings in the context of competitive acquisition market pricing. Strong property fundamentals and successful recent projects have also caused some companies to moderately increase their appetite for speculative development projects. Most management teams believe that building offers risk-adjusted returns superior to buying in the context of aggressive direct-market acquisition cap rates. While accretive, though, Fitch generally views later-cycle development as having execution and funding risks.<\/p>\n<p>Issuers will retain access to low all-in-cost secured and unsecured debt, despite expectations of increasing short-term interest rates. The property transaction market remains robust, which should enable companies to fund growth initiatives and improve portfolio quality via asset sales. Equity issuance to fund acquisitions and development will be limited at best, given the NAV discount at which most REITs trade. Furthermore, the public unsecured bond market is increasingly distinguishing among\u00a0issuers with respect to borrowing cost and access.<\/p>\n<p>One facet of the U.S. REIT sector not likely to change to any degree in 2016 will be leverage. Proceeds from dispositions will likely be redeployed toward acquisitions, development or share repurchases, and equity issuance will be episodic. Any deleveraging will likely be organic.<\/p>\n<p>REIT inaugural public bond offerings are also unlikely this year. There have been no REIT IPOs since March, and they are not likely to return until bond investors and issuers can resolve the change of control stalemate. Potential inaugural issuers unable or unwilling to access the public bond markets have obtained funding via other sources of unsecured capital, such as private placement bonds and the bank term loan market.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>By Steven Marks, Head of U.S. REITs, Fitch Ratings: Why REITs are favoring development over acquisitions in 2016\u2014and whether they should. <\/p>\n","protected":false},"author":1700,"featured_media":1004130719,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21782,21684],"tags":[],"class_list":["post-1004134944","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-development","category-viewpoint"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v24.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>REIT Column: Equity REITs Adopt \u2018Build-Over-Buy\u2019 Strategy - Commercial Property Executive<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/reit-column-u-s-equity-reits-adopt-build-over-buy-strategy-for-2016\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"REIT Column: Equity REITs Adopt \u2018Build-Over-Buy\u2019 Strategy\" \/>\n<meta property=\"og:description\" content=\"By Steven Marks, Head of U.S. REITs, Fitch Ratings: Why REITs are favoring development over acquisitions in 2016\u2014and whether they should.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/reit-column-u-s-equity-reits-adopt-build-over-buy-strategy-for-2016\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2016-01-20T17:18:05+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-08T12:15:45+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2015\/11\/Steven-Marks.png\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"600\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Steven Marks\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/reit-column-u-s-equity-reits-adopt-build-over-buy-strategy-for-2016\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/reit-column-u-s-equity-reits-adopt-build-over-buy-strategy-for-2016\/\",\"name\":\"REIT Column: Equity REITs Adopt \u2018Build-Over-Buy\u2019 Strategy - 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