Nareit's Reit Report Podcast

The latest edition of the Nareit REIT Report podcast looked at the advent of 5G—and what it means for infrastructure REITs—with Ji Zhang, senior research analyst at Cohen & Steers.Zhang discussed the evolution of infrastructure REITs as a component of the broader REIT industry.In 2000, traditional REIT sectors accounted for about three quarters of REIT market capitalization, she observed. Today, they count for just under half. The first data center REIT was listed in 2004 at just under $300 million in market cap. In 2012, the first tower company converted to a REIT at about a $30 billion market cap. Today, tower and data center REITs comprise just under 25% of the REIT investment universe.“We believe these technology-oriented sectors will continue to gain in importance given their secular demand drivers and important roles in the digital economy,” Zhang noted.

In the latest edition of the Nareit REIT Report podcast, Kimco Realty Corp. CEO Conor Flynn discussed the shopping center REIT’s unique approach to ESG matters.Flynn reflected on the evolution of Kimco’s ESG program since its inauguration 8 years ago. “Today we’re in a very different place,” he said. As the program has matured, Kimco has found ways to embed various ESG activities and responsibilities into existing teams across the entire organization. Now, instead of having one individual directing all its ESG efforts, Kimco has shifted to managing through a cross-functional steering committee comprised of various department leaders.From an environmental perspective, moving the needle requires a sustained multiyear commitment, Flynn observed. He noted that the scale with which Kimco has adopted energy efficiency measures has been “transformative.” For example, the REIT recently concluded a first-of-its-kind installation of over 4,500 submeters across every tenant space in its portfolio. Because tenants are no

Steven Brown, global head and senior portfolio manager, real estate, at American Century Investment Management, discussed broad trends impacting the REIT market during a podcast interview at REITweek: 2019 Investor Conference.REITs have had a “nice bounce” in 2019, partly because of how inexpensive they were at the end of 2018 but also because of the change in Federal Reserve language toward interest rates, according to Brown. “We think that real estate fundamentals are sound, but if we do get a period of easing, that will support real estate even more," he said.

In the latest edition of the Nareit REIT report podcast, Matt Walaszek, associate director of industrial and logistics research at CBRE, provided an overview of trends in the cold storage sector.While cold storage represents only a small portion of the overall industrial warehouse inventory, major demand drivers such as population growth and changing consumer behaviors are driving increased attention to the segment, according to Walaszek.The strongest demand for cold storage facilities is currently coming from densely-populated metro areas, including Los Angeles, Seattle, Chicago, and the Northeast region. However, areas that are experiencing significant population growth, such as South Florida, Atlanta, and Dallas, are also fueling demand, he said.

Marty Cicco, senior managing director at Evercore Partners, spoke with Nareit’s REIT Report podcast in New York at REITweek: 2019 Investor Conference.Cicco assessed the state of the commercial real estate market at mid-year. “It ranges from healthy, to beyond healthy, to unbelievable in some cases, but there are still a few sectors that have some challenges,” he said.At the same time, the business cycle—while clearly in the later stages—is breaking all records, according to Cicco.“You’re in an extraordinary time with low interest rates, the economy in the U.S. appears healthy, but we’re obviously in the midst of a growing trade war with China…[and] you’ve got issue like North Korea and Iran out there that could jolt the markets,” Cicco said.

Joel Beam, senior portfolio manager of real estate strategies at Salient, spoke with Nareit’s REIT Report podcast in New York at REITweek: 2019 Investor Conference.Trade tensions are reinforcing the value of property investment in general, according to Beam. REITs have outperformed this year and have outperformed “meaningfully” versus the broader market since April 30, he said. “I think that’s a testament that real estate represents a flight-to-safety approach for a lot of folks.”While certain subsectors may have more exposure to trade policy changes, “we’re really waiting for clarity on these matters before making portfolio changes. To some extent it’s too soon to tell,” Beam said.Beam also commented on the ongoing impact of e-commerce. “To me, the drama in this space is all about what happens to retail…we’re in a situation where tenants have more leverage and more choices, and landlords on the margin are having to rethink how they tenant their properties,” he said.

REITs and listed real estate are likely to see minimal impact from ongoing trade tensions, while the sector offers the potential for “outsized returns” due to solid fundamentals, according to Laurel Durkay, senior vice president and portfolio manager of global and U.S. real estate at Cohen & Steers.Durkay was a guest on the latest edition of the Nareit REIT Report podcast.The domestically-focused nature of real estate securities provides “relative insulation” from trade tensions versus the broader equity market, Durkay said.“We do believe that real estate and REITs do offer a lot of very positive attributes in a time of heightened economic insecurity,” she noted.

The latest edition of the Nareit REIT Report podcast looked at the impact of New York’s recently-passed Climate Mobilization Act with Cliff Majersik, executive director of the Institute for Market Transformation.Majersik described the bill, which calls for buildings larger than 25,000 square feet to institute a 40% reduction in carbon emissions by 2030 and 80% by 2050, as “very ambitious.” He noted that New York and Washington, D.C. are the only two cities in the nation to target existing buildings.While many building owners probably won’t have to make any adjustments during the first compliance period, they would be “well advised to look at the whole scope of the law, all the way out to 2050, and to try to make sure they are taking action now that will position themselves to meet the requirements going forward,” Majersik said.

The latest edition of the Nareit REIT Report podcast explores the topic of real estate-targeted technology, commonly known as PropTech, with Blake Liggio, a partner in the law firm Goodwin’s Real Estate Industry Group.PropTech has seen significant acceleration in recent years due to the growth of technologies targeting real estate and the increase in capital supporting those platforms, according to Liggio.Liggio said the benefits of PropTech within the real estate industry, namely the ability to increase operational efficiencies and impact overall returns, have become clearer. “This is a relatively new development…real estate was generally resistant to the idea that advancing technology was necessarily a worthwhile effort to explore,” he said.

The latest edition of Nareit’s REIT Report podcast took an inside look at retail real estate with Joe Coradino, CEO of Philadelphia-based PREIT since 2012.Coradino described 2019 as an “exciting year” for PREIT. “We have so many milestones that we will execute on this year, projects that are coming to fruition that in some cases go back nearly 15 years.”One noteworthy project is Fashion District Philadelphia, which opens in September. It sits atop the main transportation station in downtown Philadelphia, with about 22 million commuters a year accessing public transportation via the mall’s concourse level.

The latest edition of the Nareit REIT Report podcast featured Gunnar Branson, the CEO of AFIRE, an association for global investors focused on institutional real estate in the United States.Branson highlighted some of the key findings from AFIRE’s recently-released annual International Investor Survey.Despite the current length of the real estate cycle and geopolitical and economic concerns, Branson said there’s “a strong sense of confidence in how things look this year. There continues to be a lot of interest from non-U.S. investors in U.S. property markets.”

Richard Stockton, president and CEO of Braemar Hotels & Resorts discussed developments in the luxury hotel segment during the latest edition of the Nareit REIT Report podcast.Braemar invests primarily in full-service luxury hotels and resorts. Stockton discussed steps Braemar has taken to realign its portfolio, while also commenting on some of the significant weather-related challenges the REIT has faced.Stockton, meanwhile, touched on the benefits Braemar is accruing through its Enhanced Return Funding Program with external advisor Ashford Inc.Turning to investment transaction and liquidity in the luxury resort sector, Stockton said major buyers, including other REITs, have moved into the space. “That has put some pressure on pricing…pricing has gotten richer. It’s been a little bit more difficult for us to find deals that make sense financially, so we’re finding ourselves sifting through more deals than we’ve had to do in the past to meet our return criteria.”

Michael Kessler, a partner in the New York REIT practice of Alston & Bird LLP, was a guest on the latest episode of Nareit’s REIT Report podcast.Kessler discussed the next wave of innovative ideas and concepts that are emerging in the REIT sector.One area that is generating attention is clean energy and Property Assessed Clean Energy (PACE) loans, Kessler said. These provide incentives and regulatory frameworks to enable private capital, including mREITs, to fund energy efficiency improvements in residential and commercial properties.Many states have adopted PACE programs or are actively considering them, according to Kessler, adding that estimates point to hundreds of billions of dollars of improvements needing funding over time.Kessler sees opportunity zones as another area of interest. While not every opportunity zone strategy is right for a REIT, such as a fix-and-flip strategy, “many other strategies could work nicely using a REIT platform and potentially see better valuations.”

In the latest edition of the Nareit REIT Report podcast, Ian Anderson, director of research and analysis at CBRE, spoke about the momentum driving the life science industry and the real estate that it occupies.A new report from CBRE shows that the industry is growing at its fastest pace in 18 years, with construction of lab space in the top five markets monitored by CBRE doubling over the past year. “The industry is certainly on a tear,” Anderson said. The long-term trajectory doesn’t show anything to derail growth, which continues to attract more investors to the industry.REITs, meanwhile, play a leading role in that growth. “There’s a lot of capital needed upfront, which scares off some of the smaller investors. That gives REITs an advantage right there,” Anderson said.

In the latest edition of the Nareit REIT Report podcast, Serena Wolfe, a partner at Ernst & Young LLP, discussed the Financial Accounting Standards Board’s lease accounting standard that took effect for publicly traded companies, including REITs, at the beginning of 2019.The new standard had been under discussion for 10 years or more, and “where we actually ended up is very different from where we began,” Wolfe said. The impact for REITs as lessors is not as significant as originally anticipated, and definitely not as large as for lessees, such as restaurants and retailers, she noted. REITs that are lessees, through a ground lease or a building lease, for example, “could face a large absolute dollar value on the balance sheet.”REITs, meanwhile, are largely up to date in adopting the new standard, according to Wolfe. She added that the new standard eliminates real-estate-specific lease guidance, meaning that REITs now have to follow guidance for leases of all assets. REITs will have to step back and look a

In the latest edition of the Nareit REIT Report podcast, Doug Bibby, president of the National Multifamily Housing Council (NMHC), discussed a new initiative aimed at attracting talent into the real estate industry.The NMHC is part of a collaboration of 29 real estate industry organizations, including Nareit, that are working to highlight the diversity of career paths within the sector. Together they have created Careers Building Communities (CBC), a platform designed for students, educators, and other individuals to explore the industry and learn more about what it takes to obtain education and employment within each sector.“It’s no secret that the job market is really, really tight right now. Commercial real estate is looking to fill literally millions of jobs,” Bibby said.

The latest edition of the Nareit REIT Report podcast featured Yoel Kranz, a partner in Goodwin’s REIT Capital Markets and M&A/Corporate Governance practices, and Daniel Adams, a partner in the firm’s Business Law Department, where he is co-chair of the Capital Markets group and a member of its REITs and Real Estate M&A practices.Kranz and Adams spoke on various corporate governance issues, including where the impetus for change in the REIT sector is coming from today.Kranz pointed out that there is a relatively small group of large institutional investors that have changed the way they approach governance issues. “It used to be that these were very passive investors…that has really changed,” he said. Large institutional investors have taken a very active interest in governance and are making their wishes and interests known to management teams.“We’re living in a social and political environment today where governance is front and center,” Kranz said. “There really is a focus on good governance and doi

In the latest edition of the Nareit REIT Report podcast, Jim Sullivan, managing director and REIT analyst at BTIG, discussed the outlook for New York real estate following Amazon’s decision to abandon its plans to locate a second headquarters in Long Island City.Sullivan said that while the loss of a potential 25,000 jobs will obviously result in less demand, a recent decision by Alexandria Real Estate Equities, Inc. (NYSE: ARE) to purchase property in Long Island City speaks to the area’s growing importance as a home for the life sciences industry. He expects Alexandria to expand its presence there in the coming years. Overall, the Amazon decision is “not a death knell for Long Island City, but clearly a short-term setback.”Over the last couple of years, New York has become a center of tech job growth—including a significant commitment from Google, as well as from Amazon in Manhattan, according to Sullivan. “Firms up and down the spectrum of tech and social media are expanding aggressively in New York,” with

In the latest edition of the Nareit REIT Report podcast, Tim Bodner, U.S. real estate deals leader at PwC, discussed a range of topics, including the outlook for REIT mergers and acquisitions (M&A); the appeal of non-gateway markets; and the performance of non-traditional REIT asset classes.Last year saw several major REIT M&A deals, with an average value per transaction of $6.4 billion. Two deals exceeded $10 billion, Bodner noted.“We do believe that conditions are in place for more of the same in 2019,” fueled in part by the “tremendous” amount of private capital available, Bodner said.

Michael Torres, CEO of Adelante Capital Management, and Jeung Hyun, portfolio manager, joined the latest edition of the Nareit REIT Report podcast.Torres and Hyun discussed a number of topics, including: REIT fundamentals; discounts to net asset value (NAV); merger and acquisition (M&A) activity; the role of active portfolio management; and the potential for increased Asian investment in real estate.Torres noted that the REIT industry is entering 2019 with attractive dividend yields and record-low leverage. On the other hand, private market participants have a lower cost of capital and the ability to outbid their public market counterparts.Hyun said he expects some property types will trade at discounts to NAV for the foreseeable future. As for M&A activity, public to public deals are not as likely because “investors aren’t making enough of a distinction between companies and management teams to whom they want to grant the cost of capital advantage.”