Citigroup became the top equity underwriter for real estate investment trusts in 2012, eclipsing long-time leader Bank of America Merrill Lynch, The Wall Street Journal reported Jan. 23.
Citigroup, which ranked sixth in 2011, ascended to the top partly by utilizing its balance sheet and expanding lending to REITs through credit facilities and other bank loans.
“We decided we were going to increase our capital commitment to the REIT sector because we felt confident we could manage the risk,” Thomas Flexner, global head of real estate for Citigroup, told the Journal.
In 2012, REITs raised approximately $40 billion in equity — a record-high. The sector accounted for 15 percent of the $258 billion in total equity issuance in 2012 for all financial companies, up from 8 percent in 2009 when many REIT shares were at their post-downturn lows.
Wall Street firms made a total of $976 million in underwriting fees from REIT equity issues in 2012, up from $930 million in 2011, according to Dealogic, a firm that tracks deals by all publicly traded equity and mortgage REITs, the Journal reported.
Citigroup, which has been attempting to increase its investment-banking portfolio in several sectors, was the lead manager in 45 deals with a total value of $6.5 billion according to Dealogic, the Journal reported. Its biggest deal last year was a nearly $1 billion private issuance of stock of Ventas Inc., a healthcare landlord.
The Bank of America Merrill Lynch unit of Bank of America Corp. was second with 52 deals valued at $6.26 billion.
In other notable moves in 2012, Goldman Sachs Group rose to number 5 as lead manager in REIT equity deals, underwriting 12 transactions worth $2.9 billion. The firm ranked 10th in 2011.
Morgan Stanley had the most precipitous drop, moving from second place in 2011 to 10th place in 2012. Jeff Harte, a banking analyst at investment banking firm Sandler O’Neill & Partners indicated that some REITs may have gone to other investment banks after Moody’s Investors Service downgraded Mortgage Stanley’s credit rating last June.
Flexner said Citigroup became more aggressive in its pursuit of REIT underwriting business after the sector made it through the difficult downturn with minimal defaults on debt obligations.
Citigroup also led the rankings for most total equity raised in 2012 for the entire financial sector, according to Dealogic, the Journal reported. However, the bank wasn’t as successful with REIT debt deals last year, ranking fifth with $3.9 billion in transactions down from fourth place in 2011.