Banker Sees Significant Effects of Quantitative Easing in REIT Market

Vick Seth, managing director with Raymond James Real Estate Investment Banking Group, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Seth discussed how the Federal Reserve’s quantitative easing programs have affected the REIT capital market.

“Pretty significantly is the short answer,” he said. “There is an estimated $250 billion of money printing each month between the Federal Reserve, the Bank of Japan and everybody else. My own guestimate of that $250 billion, over half of it is showing up in the U.S. capital markets and asset markets, so there is an inflation, if you will, good for us, in prices both on the asset side as well as the capital markets. So that has created a lot of liquidity.”

Seth described sectors where initial public offering (IPO) activity could potentially be noticeable.

“IPOs are starting to re-emerge,” he said. “I think that the sectors that particularly are ripe for IPOs are those that are trading at premiums to NAVs, whether its multifamily or retail. The retail is probably my top choice to see a couple of fairly large portfolios come to market for the second half of the year, because the arbitrage between the private and public is favoring the public markets today.”

Seth shared his opinion regarding what the prevailing REIT story will be in the second half of the year.

“I think it’s going to be a continued storyline,” he said. “One of the new sectors that has emerged is single-family for rent, so I continue to see that play out in the second half. Clearly there is huge opportunity in the marketplace when you look at the fact that there’s somewhere between 3 and 5 million homes that will be coming on the market. There has been substantial capital investment, and certainly a lot of rhetoric about the space, but we’re just in the beginnings of IPO formation in that sector.”