Mark Decker, Jr., managing director of real estate investment banking with BMO Capital Markets joined REIT.com for a video interview at REITWorld 2012: NAREIT's Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego.
BMO Capital Markets is a financial services provider that offers investment and corporate banking, advisory services, treasury and market risk management, institutional investing and research.
Decker was asked to discuss merger and acquisitions activity in 2012 and his predictions for M&A in 2013.
"I think we will see more activity in 2013. 2012 was a relatively light year, and 2011 was a big year dominated by a couple of large transaction," he said. "But there are a number of private, large equity funds that have just closed new funds, there are a number of REITs with very attractive currencies and then there are some companies with less attractive currencies, and I think those are all the ingredients for some very active M&A."
From a sector standpoint, Decker predicted that health care REITs will continue to see robust activity. He said the demographics will remain in the sector's favor. He added that the sector is ripe for consolidation.
Additionally, Decker said the self-storage sector is emerging as another sector that is trading
at a pretty significant premium." Self-storage is also fragmented, and Decker said he anticipates continued activity in that industry as well.
"I think that as the cycle deepens, hopefully some of these other sectors, like office, will see their fundamentals and currency improve," he said.
When it comes to private companies and REITs competing for portfolios or single properties, Decker said it's a case of the "have and have-not theme that we've seen for the past few years."
He said the public companies have an advantage. While public companies are not able to take on as much leverage as a private buyer, he noted that the number of capital sources that will allow private buyers to take on significant leverage is not as large as it was five years ago.