Advisory Intelligence: Building Real Estate for the IRO
The real estate sector is an interesting area, something of its own animal. Although from a measurement perspective that has not always been the case. It was traditionally driven by broad macroeconomic measurements. 'Now we are looking at it in a more granular way and examining the fundamentals of each individual property sector,' says Michael Spector, senior analyst on the real estate and REITs team at Nasdaq Advisory Services.
Therefore, this inevitably creates a varied picture of what is happening in different respective property areas. 'Some property sectors will continue to outpace others. It is a simple case of supply and demand,' adds Spector.
This has implications for the IRO on a number of levels. 'This creates a competition for capital and IROs need to be able to tell a compelling and differentiating story to current and prospective investors on why you should invest in a particular property sector,' notes Spector.
'And from an IR perspective, there is a need to wear multiple hats: you are dealing with the capital markets, property investments, leasing, and development. Educating investors on what you're doing to grow FFO (funds from operations) and consistently cover your dividend - transforming the IR function into a more expansive role,' observes Spector.
Digging deeper, the IRO must be aware of market details. 'The IRO needs to understand the metrics specific to real estate, like FFO and NAV (net asset value) and be prepared to speak about how they drive tenant demand and identify opportunities in their current portfolio or through acquisitions. Having this understanding is essential to the IRO's ability to shape the investment story and stand apart from the competition,' adds Spector.
As with the most of the finance and investor world, there has been a President Trump impact. 'The biggest story was the spike in infrastructure and Prison/Detention REITs (real estate investment trusts) immediately following the election,' says Spector. Evidence suggests that REITs are in a position to raise the most equity since 2013. 'The fundamental narrative going forward now is on tax reform. And we are waiting for something of substance to come out. Real estate is a more defensive pocket of the market - so I don't think we are going to see the fluctuations you see in other sectors.'
There could, however, be some tightening going forward, notes Spector. 'What we are going to see is more pressure on REITs to either divest of underperforming assets or sell the company in a case where a large valuation gap exists. There is certainly room for contraction. Some of these guys are sitting on vacancy and I think we are going to see some pressure from investors as they look for creative ways to either repurpose space or sell it off. I think we could hear some noise on this heading into 2018 with a ramp up in activism and M&A.'
Having a bearing on this will be the expected interest rate rise later this month. A point supported by the Fed's last published minutes. 'The market is expecting a 25 basis point hike. And REITs - as an income producing investment - the common thought is a rise in treasury yields creates less pressure on investors to seek out alternative income through investments like REITs. Additionally, higher rates equate to higher cost of debt, which might be a hurdle for certain REITs,' notes Spector.
However, overall, real estate fundamentals are solid, concludes Spector. 'Certain property sectors are definitely positioned better than others given secular trends but overall the commercial real estate market is generally healthy.'
ABOUT NASDAQ CORPORATE SOLUTIONS
INVESTOR RELATIONS I PUBLIC RELATIONS I COMMUNICATIONS I BOARD MANAGEMENT
Nasdaq Corporate Solutions helps organizations manage and master the two-way flow of information with their audiences. Around the globe, market leaders rely upon our unmatched suite of advanced technology, analytics and consultative services to maximize the value of their work-from investor relations and corporate governance to public relations and communications.
Nasdaq Corporate Solutions - Advisory Services
Nasdaq Advisory Services can partner with you to advise on and help facilitate your IR program. The Advisory Services group offers an objective analysis of the investment community tailored specifically to a company's IR program. With collective insight into the markets, we are well positioned to interpret special situations such as changing interest rates and their impact on your capital structure.
Nasdaq IR Insight + Nasdaq Advisory Services
Access activist data, targeting recommendations and prioritization data and more from advisory specialists via Nasdaq IR Insight.
Follow us on Twitter: @MyCorpSolutions
Follow us on LinkedIn: Nasdaq Corporate Solutions
This communication and the content found by following any link herein are being provided to you by Nasdaq Corporate Solutions, a business of Nasdaq, Inc. and certain of its subsidiaries (collectively, "Nasdaq"), for informational purposes only. Nasdaq makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Nasdaq, the Nasdaq logo, and Nasdaq Corporate Solutions are registered and unregistered trademarks, or service marks, of Nasdaq, Inc. or its subsidiaries in the U.S. and other countries. ©Nasdaq, Inc. 2017. All rights reserved.
Comments or opinions expressed on the blog are those of their respective contributors only. The views expressed on this blog do not necessarily represent the views of Nasdaq, Inc. or any of its affiliates, or its or their management or employees (collectively, "Nasdaq"). Nasdaq is not responsible for, and disclaims any and all liability for the content contributed by contributors to the blog.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.