BofA Reaps Rewards in Merrill REIT Deals

Bank of America (BAC) has caught a lot of grief for its acquisition of Merrill Lynch, including from me, but the deal is already showing some benefits.

Real Estate Investment Trusts (REITs) have been raising equity at a strong clip in recent weeks, and the combined BofA/Merrill has been doing the bulk of the underwriting. The head of real estate investment banking at a rival bank says REITs like raising equity with Merrill because its huge brokerage force sells the offering to its retail investor clients. However, he says much of the recent sales have gone to institutional money managers.

U.S. REITs have priced 14 secondary offerings in April alone, according to the National Association of Real Estate Investment Trusts (NAREIT). REITs have raised $7.35 billion in 21 offerings through April, compared to $11.1 billion in 60 offerings last year. And analysts believe REITs will need plenty more equity as they try to reduce the debt they raised before the crisis hit.

That bodes well for BofA, which has already racked up more than $100 million in investment banking fees from REITs, better than any other bank through Thursday, according to Dealogic. That compares to just $66 million for second-place JPMorgan Chase (JPM) and $43 million for third-place underwriter Deutsche Bank (DB).

Surprisingly left out of all the REIT fundraising is Morgan Stanley (MS). Though the bank is widely thought to be a power in real estate investment banking, it is in eighth place. A Morgan Stanley spokeswoman declined to comment.