In the office sector, for example, Lachance notes that development-oriented REITs continue to pursue new projects, “some more aggressively than others.” Boston Properties, for one, is taking “a more conservative posture on pre-leasing requirements,” while Mack-Cali Realty Corp. remains bullish on the multifamily starts it's expecting to commence through its Roseland division over the next few years. “Unfortunately, most of the REITs involved in development trade at sizable discounts to GAV, suggesting their cost of capital is not conducive to growing their portfolio, especially not in this risky business.”

In their REITWeek presentations, a number of companies asserted that “concerns about overbuilding are overblown,” writes Persin. “They note that construction is at or below long-term historical norms and that softness in certain product types in selected markets is a temporary phenomenon that will be quickly rectified after a lease-up period.” However, she adds that some REITs, like Equity Residential, noted at REITWeek that they have already begun cutting back on their development pipelines.

More broadly, Persin notes that given the difficulty in achieving attractive returns at the moment due to “rich pricing,” REITs generally are pulling back on acquisitions. Still, she adds, “some types of acquisitions remain attractive to REITs. Value-add transactions offer buyers the opportunity to create value and raise rents through property improvements. Some REITs with joint ventures are buying out their partners' interests, while those that provide third-party management can opportunistically acquire properties that they manage and already know well. Others may seek large portfolio deals that can move the needle on earnings.”

NEW YORK CITY—By and large, REITs have become net sellers as the current real estate cycle has matured. “Current low cap rates make it a good time to sell, and many REITs are culling underperforming assets,” writes Susan Persin, director of research at Trepp LLC, in a TreppTalk article posted this past Friday. “Selling at high valuations allows REITs to maximize revenue, improve the overall quality of their portfolios and reshape their portfolios to enhance future profitability.”

However, in a report summing up Green Street Advisors' impressions of this year's edition of REITWeek, the annual conference in New York City sponsored each June by NAREIT, managing director Cedrik Lachance sees other factors mitigating the positive selling environment. “Four sectors sport an unfavorable cost of capital”—namely, apartment, lodging, shopping mall and office—“and the companies often have become net sellers, although many can't seem to stop developing, thus greatly hurting the benefits they would get from shrinking their balance sheets even more,” writes Lachance.

Persin notes that REITs have been recycling capital from dispositions to fund development and redevelopment activity. Turning to the public markets is a less attractive option at the moment due to the fact that many companies in the sector trade at a discount to NAV, she notes.

“REITs have significant development pipelines,” she writes. “Some that have traditionally grown more through acquisitions than development are undertaking more building activity, since it is more difficult to achieve attractive returns on acquisitions.”

In the office sector, for example, Lachance notes that development-oriented REITs continue to pursue new projects, “some more aggressively than others.” Boston Properties, for one, is taking “a more conservative posture on pre-leasing requirements,” while Mack-Cali Realty Corp. remains bullish on the multifamily starts it's expecting to commence through its Roseland division over the next few years. “Unfortunately, most of the REITs involved in development trade at sizable discounts to GAV, suggesting their cost of capital is not conducive to growing their portfolio, especially not in this risky business.”

In their REITWeek presentations, a number of companies asserted that “concerns about overbuilding are overblown,” writes Persin. “They note that construction is at or below long-term historical norms and that softness in certain product types in selected markets is a temporary phenomenon that will be quickly rectified after a lease-up period.” However, she adds that some REITs, like Equity Residential, noted at REITWeek that they have already begun cutting back on their development pipelines.

More broadly, Persin notes that given the difficulty in achieving attractive returns at the moment due to “rich pricing,” REITs generally are pulling back on acquisitions. Still, she adds, “some types of acquisitions remain attractive to REITs. Value-add transactions offer buyers the opportunity to create value and raise rents through property improvements. Some REITs with joint ventures are buying out their partners' interests, while those that provide third-party management can opportunistically acquire properties that they manage and already know well. Others may seek large portfolio deals that can move the needle on earnings.”