Nareit's Reit Report Podcast

REIT industry ESG data continues to improve both in quality and quantity, yet the lack of standardization remains a challenge, according to Bradford Stoesser, senior managing director and global industry analyst at Wellington Management.In a REIT Report interview, Stoesser said REIT ESG data is “markedly better than even just a few years ago.”“We are starting to see a proliferation of data providers and while more ESG data is a positive, quality and standardization are important, allowing for effective comparisons,” Stoesser said. He noted that companies largely self-report, meaning that transparency is often lacking.Data providers, meanwhile, measure ESG differently and often are not clear in terms of the specific subcategories of E, S and G, and how they are measured, Stoesser explained. “The risk is that investors end up with very different impressions of a corporate’s ESG (information) based on the data they source,” he said.

The authors of a new book on REITs and real estate investment, Educated REIT Investing, say it is the first of its kind to target academic institutions, while still being concise enough to attract a general audience.The book is co-authored by Stephanie Krewson-Kelly, vice president of investor relations at Corporate Office Educated REIT InvestingProperties Trust (NYSE: OFC), and Glenn Mueller, a professor at the University of Denver’s Franklin L. Burns School of Real Estate and Construction Management, and a real estate investment strategist at Black Creek Group.The book updates Krewson-Kelly’s 2016 book, The Intelligent REIT Investor, and includes new chapters by Mueller. Nareit Senior Economist Calvin Schnure and Merrie Frankel, president of Minerva Realty Consultants, also contributed to the book.

With 100% of its ground lease rents paid in 2020 and newly-received investment grade credit ratings, Safehold Inc. (NYSE: SAFE) Chairman and CEO Jay Sugarman says the REIT is “really well positioned to keep growing.”Speaking on the REIT Report, Sugarman noted that despite the challenges of 2020, “last year actually proved how strong the business is.” Meanwhile, new ratings from Moody’s Investors Services and Fitch Ratings “will be a pretty major competitive advantage,” he added.Sugarman noted that when it comes to selecting particular property types, “our mission is to go where the best markets and land is.” Multifamily has been a “great story so far,” and represents about 25% of the portfolio, he said. “I imagine we’ll be in all property types in the top 30 markets in the next year or so.”

Social media site Clubhouse is emerging as a new and innovative way to facilitate education about commercial real estate and to provide networking opportunities for individuals across the industry, according to David Auerbach, an institutional trader at World Equity Group, Inc.Clubhouse is an invitation-only iPhone social media app launched in 2020 that enables users to join live audio discussions on a range of topics hosted in ‘rooms’ on the Clubhouse platform. Participants can enter the various rooms as an audience member and can join the conversation by digitally raising their hand to the host.Speaking on the REIT Report, Auerbach discussed his own involvement with Clubhouse, which includes hosting daily discussions on a variety of REIT and real estate-related topics with his partner, Yoni Miller.

Nareit’s T-Tracker fourth quarter 2020 data indicate that the REIT industry is recovering from its weakest levels seen during the pandemic.Speaking on the REIT Report, Nareit Senior Economist Calvin Schnure said the REIT industry is “showing a good continuing recovery, not a complete recovery, but a recovery from the worst part of the pandemic a year ago.”According to the T-Tracker, funds from operations (FFO) of all equity REITs gained 11.3% in the fourth quarter from the third quarter, which itself was 10.3% higher than the second quarter. The recovery is not uniform, Schnure pointed out. Earnings for sectors at the front line of the shutdown, such as lodging and retail, continue to be quite weak. Other sectors have benefitted, namely those that support the digital economy, as well as industrial.

Differences in how real estate sectors perform have never been as “profound” as they are today, according to Michael Sonnenfeldt, founder and chairman of TIGER 21, a peer membership organization of high net worth current and former entrepreneurs, investors, and top executives.TIGER 21 members collectively manage personal assets of over $85 billion.Speaking on the REIT Report, Sonnenfeldt described the current situation in real estate as a “tale of two cities,” with retail “in a difficult strait” and industrial “on fire.”Sonnenfeldt explained that real estate has been the number one asset allocation for TIGER 21 members since the group was founded in 1999—and is likely to stay that way. Currently, real estate accounts for 27% of TIGER 21 portfolios and is favored by members due to its unique benefits and member expertise in the field, he said.

Matt Ritter, senior research consultant for NEPC, joined guest host Meredith Despins, Nareit senior vice president, investment affairs, for a special edition of The REIT Report podcast to discuss how REIT-based investment can deliver access to a 21st century real estate portfolio.NEPC is an independent investment consultant and private wealth advisor. Its clients—including public pensions, corporate pensions, endowments, foundations, health care groups, and private wealth—collectively represent approximately $1.1 trillion in total assets. Ritter is a member of NEPC’s Real Assets Research Group and the Portfolio Construction Lead for the Real Assets Beta Group.Speaking to the challenges clients are facing in their real estate portfolios today, Ritter noted that many clients—particularly those with net outflows—are seeking durable income and are asking “what’s the future of my existing portfolio going to look like?”Historically, many institutional investors have accessed real estate through private markets, whi

The data center industry holds a leadership position on climate change issues as technological advances create greater efficiencies while economies of scale result in a lower energy profile, according to Kyle Myers, senior director of environmental health, safety, and sustainability at CyrusOne, Inc. (Nasdaq: CONE).Speaking on the REIT Report, Myers pointed to estimates that 1-3% of the entire power consumed on earth is consumed within data centers.CyrusOne has set a goal of reaching zero carbon emissions by 2040 across the organization. Myers said innovation on the design side is “super important,” while CyrusOne is also looking at existing efficiencies across the portfolio, such as infrastructure and operational improvements.

Past racially-explicit policies by federal, state, and local governments—especially those concerning housing—imposed a level of segregation on the United States that was so powerful it still determines the racial landscape of today, according to Richard Rothstein, author of The Color of Law: A Forgotten History of How Our Government Segregated America.Rothstein is also a distinguished fellow of the Economic Policy Institute and a senior fellow (emeritus) at the Thurgood Marshall Institute of the NAACP Legal Defense Fund.In a wide-ranging conversation with Nathaalie Carey, Nareit senior vice president for industry affairs and social responsibility, Rothstein pointed to the government’s deliberate move after World War II to create white suburban communities across the country as a key factor in preventing the accumulation of wealth and advancement of the African American population.

Following a breakout year for special purpose acquisition companies (SPACs) in 2020, activity is forecast to remain brisk in 2021, with REITs expected to take a keener interest in the structure, according to Jocelyn Arel and Audrey Leigh, partners at Goodwin.SPACs are a pool of capital formed through an initial public offering (IPO). SPAC sponsors go through the traditional IPO process, complete with Securities and Exchange Commission (SEC) review and roadshows, Arel, a partner in the firm’s Technology Companies practice and leader of the firm’s SPAC practice, explained. The capital is then placed into trust and is available to combine with an operating company and fund that company’s IPO, referred to as the SPAC-IPO.“People are looking at the structure as an efficient way to take companies public and as an alternative to the traditional IPO or direct listings. In essence it’s really giving companies optionality in terms of how they want to approach the market,” Arel said.

Fourth quarter GDP data released by the Bureau of Economic Analysis underscores the continued pressure facing the services sector, although a surge in spending is likely once vaccines bring the pandemic under control, Nareit Senior Economist Calvin Schnure says.Speaking on the REIT Report, Schnure noted that GDP growth in the fourth quarter of 2020 slowed to a 4.0% annual rate after a record 33% in the third quarter.Some slowing was inevitable, Schnure said. He noted that a large divergence remains in place between the services and goods sectors, with the decline in services spending accounting for almost all of the decline in fourth quarter GDP compared to before the pandemic.

While an economic recovery is expected to take hold, benefitting commercial real estate in its wake, any significant improvement is likely to occur starting in the second half of 2021, according to Nareit Senior Economist Calvin Schnure.Speaking on the REIT report, Schnure highlighted some of the key themes of Nareit’s 2021 Outlook for REITs and Commercial Real Estate.Schnure noted that “we’re going to see some strengthening of the economic recovery and that’s going to benefit the commercial real estate markets quite a bit.” However, the improvement will really be driven by vaccines bringing the pandemic under control, which is not expected before the second half.

INDUS Realty Trust, Inc. (Nasdaq: INDT) President and CEO Michael Gamzon says the REIT’s focus on logistics real estate in high growth, supply-constrained markets with multiple drivers of demand positions the company well to respond to changes in supply chain strategies.INDUS recently elected REIT status and changed its name from Griffin Industrial Realty. Speaking on the REIT Report, Gamzon said the company chose to convert to a REIT in part because it “aligned with the business we’re in,” as well as allowing INDUS to seek out capital in order to be an active developer and acquirer of assets.INDUS’ core markets are: Hartford, Connecticut; Lehigh Valley, Pennsylvania; Orlando; and Charlotte, North Carolina. Gamzon described Lehigh Valley as “one of the best performing markets in the country.”

Nareit’s 2020 Leader in the Light Awards highlighted a strong field of companies that have worked hard during the pandemic to put their tenants’ needs first, while also reducing their energy, water, and waste output, according to Cliff Majersik, senior advisor for policy and programs at the Institute for Market Transformation.Majersik served as a judge for the 2020 Leader in the Light Awards. He noted that REITs have put a premium on making their buildings comfortable, productive, desirable, and above all—safe for their tenants.

The increased adoption of automation technology within logistics real estate will help ease the shift toward more resilient, just-in-case supply chains, according to Melinda McLaughlin, vice president and global head of research at Prologis, Inc. (NYSE: PLD).Speaking on the REIT Report, McLaughlin said the shift in supply chain format will put an intense strain on the amount of available supply of property. “Automation can help customers adapt to that and incorporate that move to more resilient supply chains, without necessarily being limited by the amount of labor or logistics real estate out in the market,” she said.McLaughlin noted that the level of automation adoption in logistics real estate is increasing but is lower than most people think. Only about 20% of warehouse facilities incorporate more advanced types of automation, and that’s highly concentrated toward e-commerce facilities due to their labor intensity, she said.

David O’Reilly, CEO of The Howard Hughes Corporation (NYSE: HHC), said the REIT has an “unparalleled opportunity” to continue to drive net asset value (NAV) growth over the next several years and decades.O’Reilly was named CEO at the start of December, after serving in that position on an interim basis since September.Speaking on the REIT Report, O’Reilly attributed the growth potential to increased demand for mixed-use live, work, play communities, coupled with over $1 billion of liquidity on the company’s balance sheet.

Recent news on commercial real estate valuations reflect growing confidence that the sector will start to recover in 2021, said Nareit Senior Economist Calvin Schnure.Speaking Dec. 7 on the REIT Report, Schnure noted that valuations appear to be more stable than they appeared a few months ago, when the sales prices of properties that were being sold showed a big discount. Volumes at that time were light, though. “As we get a better look at the market, the valuations reflect a bit more confidence that the real estate markets will recover next year,” Schnure said.Overall, Schnure noted that real estate is holding up quite well in the current environment, with rent collections recovering as businesses open up, “but obviously there are still strains.”Turning to the broader economy, Schnure noted that while it appears to be slowing, “we’re not at risk of a stall.”

David Veal, chief investment officer for the City of Austin Employee’s Retirement System (COAERS), joined guest host Meredith Despins, Nareit senior vice president, investment affairs, for a special edition of the REIT Report to discuss how investing in a completion portfolio using REITs is delivering value to the pension system’s real estate investment portfolio.Pension funds have long recognized the important role real estate plays in diversified investment portfolios. However, over the past 20 years, the real estate economy has expanded beyond the property sectors institutional investors have traditionally invested in—like retail, office, residential, or industrial. Today’s REIT industry reflects that evolution and offers investors access to a diversity of property types, including the new economy property sectors like infrastructure, cell towers, data centers, and networked logistics properties that house the growing digital economy. This rise of 21st century real estate has prompted institutional investo

STORE Capital Corp. (NYSE: STOR) President and COO Mary Fedewa says that after six years as a public company, the net lease REIT has “barely scratched the surface” in terms of tapping potential opportunities for growth.Speaking on the REIT Report, Fedewa said STORE continues to see trends “driving more net lease activity, as companies recognize the benefit of using their own capital to grow their business rather than to hold real estate.”Fedewa said that with over 200,000 companies within its target market, STORE sees plenty of runway for growth. “Opportunity is so large that it allows us to be highly selective and to focus on investment opportunities that are accretive to our shareholders, regardless of market conditions,” she noted.

REIT share prices, buoyed by positive developments with regard to progress on a COVID-19 vaccine, ended last week at their highest levels since the start of the pandemic, according to Nareit Senior Economist Calvin Schnure.Speaking Nov. 16 on the REIT Report, Schnure noted that news that Pfizer trials showed a success rate of 90% sent REITs sharply higher, especially for those sectors most impacted by the pandemic.Lodging and resort REITs were up 31% on Nov. 9 alone, while retail REITs were up nearly 20%. REITs closed out the week at the highest Friday close since March 6.