NEW YORK CITY-In our exclusive video with Howard Roth, Ernst & Young’s global real estate practice leader (click the image to play the video), he cites a recently released survey in which the firm polled more than 80 REIT CFOs on their outlook for the market and their own growth. While the European banking situation might cause some wrinkled brows, the outlook for US-based growth was strikingly more positive. Here are some of the other highlights of the survey:
•More than 82% of those E&Y surveyed expect REIT performance to be better this year than in 2010, and over 91% expect 2012’s financial results to exceed those in 2011.
•In terms of the financing market for private firms or public REITs, more than 65% feel REITs have the current advantage.
•Half of the group is unfazed by the presidential election, believing it will not impact business stability. More than 68% expect the Dow to be between 13,000 and 14,000 by the end of 2012.
•Three quarters of the group expect tenant demand to be somewhat higher this year, and more than half feel that their recent growth, leasing, access to capital and external growth potential has been “good.”
•A sizable majority of the CFOs expect to see an increase in M&A activity, and most (60.7%) expect public companies to acquire private firms as opposed to the other way around.
•40% expect their headcount to increase by 5% to 9% over the next two years
•Some 82% of the group say they have no plans to buy back their stock. A slight majority (48.8%) expect to increase their dividend. A little more than and 44% anticipate no change in their existing dividend policy. Only 7% expect to cut dividends.
•When asked about their expectations for the supply of competitive investment properties, half of the respondents expect levels to remain the same at least for the remainder of the year.
•A large majority (67%) expect convertible debt to be the source of capital for refinancing and internal growth. That is a significant change from first and second quarter results, which ran just over 16%.
•The strategy of using either secured or unsecured debt to fuel growth dropped significantly. Only 4% in the survey group see unsecured debt as the preferred option and just over 11% favored secured debt.
•More than half of those surveyed (56.5%) feel that terms available for accessing debt, such as collateral requirements, covenants and interest rates, would remain about the same as they are today. A quarter of the group expect terms to become even more favorable.
•Half of the CFOs feel that changes in accounting and governance systems have become a more frequent topic of conversation with analysts and investors.
For more information or to download a copy of the entire survey results, visit www.ey.com/realestate.
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