IT'S GOOD TO BE A REIT

June 14, 2011 | 8:00 am ET Staff Reporter

Last week, American Realty Capital CEO Nick Schorsch told us low cap rates at core buildings aren't necessarily drawbacks: ?We only go after net-leased 'Main & Main' properties. Even with cap rate compression, those buildings still have an IRR that's competitive with the 10-year Treasury.? It follows that the fundraising environment for REITs is ?very consistent? with his firm raising about $185M each month. On the supply side, Nick says, more buildings are coming on the market because owners see how much capital is chasing deals. ARC's most recent 8-K filing shows it purchased a FedEx distribution facility in Baltimore in late May for $39M, and Nick says his firm ?definitely hopes? to buy more buildings in the B-W corridor over the next 12 to 18 months.

At REITWeek in NY last week, Columbia's own COPT CEO Rand Griffin (with VP Stephanie Shackt) said his firm is driven by government and data business, which makes up 59% of its revenue and is expected to jump to 67% by '13. The defense budget is all about reallocation as the US winds down from Iraq and the Pentagon reevaluates its priorities, says Rand. It takes 60 to 90 days for activity to flow from the budget signing, which happened in April, and now the REIT is beginning to see some action—a year?s worth of spending crammed into three months—but leasing will take care of itself, he says. There are $25B of government awards in process that were held up; $18B of that will be completed by summer. All COPT?s assets under construction or planned are for government and defense. It expects to develop two to four buildings per year, which may be accelerated, especially in the wholesale data market.

IT'S GOOD TO BE A REIT

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