Nareit's Reit Report Podcast

In the latest edition of Nareit’s REIT Report podcast, Nareit Senior Vice President for Government Relations Robert Dibblee and Nareit Vice President for Government Relations John Jones discuss the outlook for the 116th Congress.With the House of Representatives now under Democratic control, and a divided Congress for the first time in nearly a decade—in addition to a looming presidential election cycle—prospects for legislative accomplishments are modest.“There will mostly be gridlock where policy is concerned, which we’re seeing reflected in the recent government shutdown,” Dibblee said. Must-do items, such as appropriations bills and debt limit legislation, could be the only two exceptions to the gridlock for the next two years, he said. “However, the current standoff could have long-term impacts on every aspect of the legislative agenda that we can’t anticipate right now.”Jones noted that “most issues will end up becoming polarized and it will be very difficult to accomplish anything of great importance d

Tom Bohjalian, Cohen & Steers’ head of U.S. real estate and a senior portfolio manager for the firm’s real estate securities portfolios, was a guest on the latest edition of Nareit’s REIT Report podcast.Bohjalian sees REIT fundamentals in 2019 looking a lot like 2018, “with supply and demand largely in balance and with landlords still having some relative pricing power.” Cash flow and dividend growth on a per share basis should remain in a mid-single digit range for both 2019 and 2020. Asset values should also remain relatively stable.Bohjalian shared the view that REITs remain significantly underrepresented in defined contribution (DC) pension plans. Increased investor education on the positive attributes of REITs, including strong returns, diversification, and liquidity, will result in investors moving away from a traditional equity and fixed income allocation to one that adds more alternatives, including REITs, he said.“It will be a continued process of education and that will take time,” Bohjalian not

Sherry Rexroad, chief investment officer of the Americas and global real estate securities platform at BlackRock, Inc., was a guest on Nareit’s REIT Report podcast, recorded in San Francisco during Nareit’s REITworld: 2018 Annual Conference.Rexroad said sustainability is playing an increasingly central role in investment decisions at BlackRock.“We really believe that sustainability-related issues, ranging from board composition and human capital to climate change, can, and often do, have real quantifiable financial impacts,” Rexroad said. BlackRock’s approach, she said, is to include environmental, social, and governance (ESG) information into the investment decision-making process as part of the risk and return analysis.

Gemma Burgess, managing director at executive search firm Ferguson Partners Ltd., was a guest on Nareit’s REIT Report podcast, recorded in San Francisco during Nareit’s REITworld: 2018 Annual Conference.Burgess commented on California’s move to require public companies to have at least one female on their boards.“We see it as a great step forward. Moreover, the importance here is placed on the investor community and boards to do the right thing… I think we’re seeing that in huge numbers at the moment across the country,” Burgess said.

Lori Marks, a senior credit officer at Moody's Investors Service, Inc., was a guest on Nareit’s REIT Report podcast, recorded in San Francisco during Nareit’s REITworld: 2018 Annual Conference.Marks said overall credit conditions for REITs are “stable, as real estate fundamentals remain solid and REITs maintain healthy balance sheets.” Growth is slowing for many property types, she said, with REITs expected to generate low single digit net operating income (NOI) growth next year.Moody’s expects REITs to maintain discipline as they seek investment opportunities, Marks said. “REITs are still able to issue unsecured debt at attractive, albeit higher, interest rates, and are also enjoying access to private capital as institutional demand for real estate remains strong,” she noted.

Diane Morefield, executive vice president and CFO of Cyrus One Inc. , was a guest on Nareit’s REIT Report podcast, recorded in San Francisco during Nareit’s REITworld: 2018 Annual Conference.CyrusOne received an investment grade rating from Standard & Poor’s in September. Although the company welcomed the news, Morefield said the ratings agencies have been slow to understand the data center model. She noted that prior to the CyrusOne upgrade there was only one other data center REIT with an investment grade rating.“Our profile, and that of the other data centers, is very consistent with the broader REIT industry,” Morefield said. She noted that more than 70 percent of CyrusOne’s customers are investment grade rated.“We’ve suffered from being classified as … a non-traditional REIT category, which has caused the rating agencies to review our asset class, in our view, more harshly than other REITs,” Morefield said. Looking ahead, “we’re very optimistic that we will achieve full investment grade rating in the

Lisa Kaufman, global CEO and Americas portfolio manager for LaSalle Investment Management Securities, was a guest on Nareit’s REIT Report podcast, recorded in San Francisco during Nareit’s REITworld: 2018 Annual Conference.Kaufman said operating fundamentals are in equilibrium across most real estate sectors, with internal growth likely to roughly match inflation for the next couple of years.Among the outliers, however, are cell towers, where the runway for growth is “longer and better than what the market perceives,” she said.

Bernhard Krieg, managing director and portfolio manager on the real estate equities team for Brookfield’s public securities group, was a guest on the latest edition of Nareit’s REIT Report podcast.Krieg discussed some of the factors that he and his team use to evaluate the global real estate securities landscape and commented on the gap between public and private real estate valuations in the United States.As for where he sees some of the best value opportunities in the U.S. market, Krieg pointed to high-quality shopping malls.“We think there’s a really big opportunity that exists for some of the larger, well-capitalized mall operators that are currently trading at a significant discount to their underlying market valuation,” Krieg said.

Jim Berry, U.S. Real Estate leader at Deloitte & Touche LLP, joined the latest edition of Nareit’s REIT Report podcast to discuss Deloitte’s newly-released 2019 Commercial Real Estate Outlook.The outlook surveyed 500 global commercial real estate investors on the factors that will drive their investment decisions in the year ahead.Berry noted that more than 97 percent of those surveyed indicated they would increase their capital allocation to real estate in the next 18 months, despite concerns about interest rates, trade tariffs, tax reform, and Brexit uncertainty.At the same time, investors plan to diversify their portfolio, “to capture the evolution of the real estate market due to the changing nature of work and tenant preferences,” Berry said.Meanwhile, the Deloitte report refers to certain real estate companies as “change agents,” due to their ability to alter the view about how physical space is used today. “Every company at this point has an opportunity to advance the ball, to adopt some of these c

Evan Marble, a member of Chatham Financial’s hedge advisory team, was a guest on the latest edition of Nareit’s REIT Report podcast.Marble discussed the planned transition away from the London Interbank Offered Rate (LIBOR) in favor of the Secured Overnight Financing Rate (SOFR). LIBOR is currently the predominant interest rate benchmark for the dollar and other global currencies and is referenced in instruments with “hundreds of trillions” of dollars of notional value, he noted.LIBOR is expected to be discontinued after 2021. SOFR was released on April 3 and is now publicly available. In July, Fannie Mae issued the market’s first-ever SOFR securities, followed by the World Bank and MetLife in August.“The market’s transition from LIBOR as a base borrowing index impacts most if not all of our real estate clients and the market broadly,” Marble said. It will impact newly-issued and legacy floating rate mortgages, corporate lines of credit, bank term loans, commercial mortgage backed securities (CMBS), as well a

Jon Bortz, chairman, president, and CEO of Pebblebrook Hotel Trust, was a guest on the latest edition of Nareit’s REIT Report podcast.Early in September, Pebblebrook announced it would pay $5.2 billion to acquire fellow hotel REIT LaSalle Hotel Properties, ending a series of revised offers that began in March. The deal is expected to close later this year.Bortz, who founded both REITs, said the two companies share an “incredible similarity” in terms of assets, quality, markets, geography, and brands.Pebblebrook has said it plans to sell between $500 million and $1 billion of assets from the combined portfolio. The bulk of sales are likely to come from the LaSalle side and from the East Coast, Bortz said. “The sales will allow us to finetune the portfolio from a size and diversification perspective,” he noted.Looking ahead, Bortz said a number of opportunities exist within the LaSalle portfolio.

Sara Neff, Kilroy Realty Corp.’s senior vice president for sustainability, was a guest on the latest edition of Nareit’s REIT Report podcast.Kilroy was recently named a global sector leader in the 2018 GRESB Real Estate Assessment.The West Coast office REIT has set a goal to achieve carbon neutral operations by the end of 2020. Neff noted that although buildings generate 40 percent of carbon emissions, they are still largely overlooked by both the real estate and the larger environmental community. Kilroy is attempting to change that and has already put agreements in place to reach the 2020 deadline, Neff said. “We are going to deliver.”

Brad Case, Nareit senior vice president for research and industry information, was a guest on the latest episode of Nareit’s REIT Report podcast and discussed the impact of emerging blockchain technology on the real estate industry.Developed in connection with cryptocurrencies, blockchain is “essentially a set of practices that make it possible to keep records of who owns assets,” Case explaied. He noted that although blockchain is not the same as distributed ledger, for the purposes of considering the effect on real estate, the two terms can be treated as synonyms.Blockchain can establish ownership of an asset much more efficiently than at present, Case said. In addition, the technology makes it possible for governments to keep property records used for tax purposes at a reduced cost and lower probability of fraud.

Conditions across the entire hotel industry are “very healthy,” said Ashford Inc. (NYSE American: AINC) Co-President and Chief Strategy Officer Rob Hays, who was a guest on the latest edition of Nareit’s REIT Report podcast.Ashford advises two REITs, Ashford Hospitality Trust, Inc., which focuses on the full-service segment, and Braemar Hotels & Resorts, which concentrates more on the luxury sector.Supply growth is holding firm at around two percent, while demand is staying ahead of that, Hays said. The industry has also seen some occupancy gains, combined with inflationary-type room rate increases, he added.

Jacques Gordon, global head of research and strategy at LaSalle Investment Management, was a recent guest on the Nareit REIT Report podcast.Gordon will be speaking on the economic outlook for real estate at Nareit’s SFO Forum 2018 on Sept. 24.In terms of the real estate cycle, “we’re in a good place,” Gordon said.“Fundamentals are healthy. There’s a lot of new supply but there’s also a lot of demand. Rent growth is steadily upward,” Gordon noted. “There’s a lot of good news already registered in 2018 and we expect steady as she goes, positive for the rest of the year,” he added.

In the latest edition of Nareit’s REIT Report podcast, Leslie Cook, ENERGY STAR program manager at the Environmental Protection Agency (EPA), discusses upcoming revisions to ENERGY STAR score calculations and steps that REITs can take to prepare for the changes.ENERGY STAR’s online tool, ENERGY STAR Portfolio Manager, is used to measure and track the energy performance of commercial buildings across the nation. For eligible buildings, the tool calculates a one to 100 ENERGY STAR score for rating a facility’s energy performance.Cook notes that the calculations for current ENERGY STAR performance metrics are based on 2003 data. Models are now being updated to reflect the 2012 Commercial Buildings Energy Consumption Survey (CBECS) from the Department of Energy. The updates will be released on August 27.

Scott Crowe, chief investment strategist at CenterSquare Investment Management, was a guest on the latest edition of Nareit’s REIT Report podcast.CenterSquare recently published a report, “The REIT vs. FAANG Valuation Showdown.” It notes that the current valuation of FAANG (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google) stocks roughly equate to $3 trillion of total equity value, versus $5.8 trillion for the entire U.S. institutional real estate market.“Essentially the choice that the market is giving investors today is, would you rather own the five most popular tech stocks in America, or half of all the commercial real estate in this country?” Crowe said. While FAANG stocks are interesting and dynamic, the largest tech companies of today may not be at the top a decade from now. Real estate, however, is still going to be around to house the companies of the future, he noted.

Allan Swaringen, president & CEO of JLL Income Property Trust, was a guest on the latest edition of the Nareit REIT Report podcast.JLL Income Property Trust is a perpetual life, daily NAV REIT that is advised by LaSalle Investment Management and sponsored by JLL.Swaringen described the landscape of the non-listed REIT sector today. He pointed to three substantive changes that have occurred in the last five to six years. They include: a move to perpetual offerings; increased regulation and the adoption of an institutional valuation methodology; and a movement toward programs diversified by property type.

SBA Communications is a wireless infrastructure REIT active in North, Central, and South American markets. The company has been in operation for nearly 30 years. Today it owns and operates close to 30,000 towers across the Western Hemisphere—from the upper reaches of Canada to the tips of Argentina and Chile.Jeffrey Stoops, president and CEO, described the domestic leasing environment as “probably as good as it’s been in the last four or five years.” All four major wireless carriers are busy pursuing projects and enhancements that ultimately will advance their transition to 5G technology, he said. SBA benefits in terms of new leases and tenancies on towers where carriers may not have been before.

Brad Case, Nareit senior vice president for research and industry information, was a guest on the latest edition of Nareit’s REIT report podcast.Case highlighted the turnaround in REIT market performance seen since February. Prior to that, REITs had underperformed the broader stock market – particularly growth stocks - for about a year and a half.