How Will Big ?Consolidator? REITs Perform Against Their Competitors and Why Is There Such Underperformance?
The heart of the question is whether the strategy of pursuing size is valid. If one is a general REIT investor, the answer has been clearly yes. These companies have provided durable and superior returns, while providing liquid access to a diverse and appropriately levered core real estate portfolio. The jury is still out however on whether these companies will outperform within their property sectors. Historically, small caps have had the edge. However, the more recent trend would appear to be that as larger public platforms become the main companies within a sector, large cap out performance kicks in, the expected results are like: Lower cost of debt and equity capital as a result of their size, greater resources with which to attract more talented managers, ability to reap economies of scale regarding purchasing, ability to enhance revenues through stronger leasing leverage.