REITs Respond To Investors Fear Of Rising Interest Rates By Selling Assets

REITs are turning to asset sales to account for falling share prices as investors react in fear to the rising interest rate environment.

The push to offload assets is an effort to avoid selling shares at discounted prices, the Wall Street Journal reports. Selling assets allows REITs to create capital that can help them reposition portfolios or buy back shares. REITs are also known to consider mergers, acquisitions or privatization by investors when their stocks take a hit. 

Typically, when rates jump — as they did at the beginning of this year — REIT share prices jump as well. In recent years this trend has changed as investors have become more wary about how higher rates will affect the overall economy and, with it, the real estate market, NAREIT reports.

REITs have unloaded more assets than they have acquired since 2016, and the trend has continued into this year. In 2016, REITs disposed of $71.4B assets and made $48.4B in acquisitions. Last year REITs offloaded $60.9B worth of assets and acquired $56.1B worth of properties. Between January and March 23, there were $6.91B worth of disposals and only $5.38B in acquisitions, the Journal reports.

Forest City Realty Trust is one such example of a company employing this type of plan. The Cleveland-based REIT has considered both mergers and acquisitions as of late and last May sold its retail portfolio to Sydney-based QIC Global Real Estate for $4B. It also sold some of its New York retail assets to Madison International Realty LLC, according to the WSJ. At some point this year Brookfield Asset Management was in talks to acquire the company, but the sale did not go through as the board ultimately decided a sale was not in the best interest of shareholders.