NAREIT: REIT Week® 2016 Key Takeaways
Last week marked another exciting milestone for REITs as a record number of attendees (3000+ industry professionals!) packed into the Waldorf Astoria in New York City to participate in REITWeek® 2016: NAREIT's Investor Forum®. Festivities included three days of company presentations, 1x1 and group investor meetings, lunches, dinners (including one with special guest, Tom Brokaw), swanky sell-side events, and seemingly endless elevator lines.
I, along with other members of the Nasdaq Real Estate Advisory Team attended the conference, leaning in to partake in all things REITs. We're excited to share some of our key takeaways:
Don't forget your passport: I was overwhelmed by the amount of foreign investors in attendance. More than 20 countries were represented in the investor roster. Many of our clients took meetings to discuss potential investment and JV opportunities. The theme of foreign investment in U.S. Real Estate was highlighted by a roundtable panel during Tuesday’s lunch session. NAREIT’s 2016 Chair moderated a panel that included Goh Kok Huat, COO and President of real estate with GIC Private Ltd., Singapore’s sovereign wealth fund. Anbang Insurance Group, who has dominated the real estate deal headlines, was also scheduled to be featured but was unable to attend the session. Chinese investment was a focal point of the discussion with the panel editorializing on the opportunity for both CRE investment in China and international investment from Chinese investors.
Our Advisory team analyzed the foreign ownership trend as a percentage of the sector’s capital base, using the 27 REITs in the S&P 500 index as a sample set. We found that foreign ownership across this group increased 479% over a 10-year period. This investment pool represented approximately 16.4% of S&P 500 REIT’s (weighted average) capital base as of the March 31, 2016 filing period. Our analysis showed that YE 2012 was a high point for foreign investment with the implementation of sub-advisory relationships between Japanese Retail Funds and US (Real Estate Dedicated) Investment Managers. It’s possible that FIRPTA reform could be an impetus for foreign inflows into the sector looking forward. In fact the Restream question regarding FIRPTA reform during Tuesday’s lunch panel was asked by yours truly.
All sold out: Divestitures were a big theme throughout company presentations with management teams communicating plans around strategic asset sales. This theme was prevalent across various property sectors as REITs look to take advantage of opportunistic valuations in order to maximize proceeds which they’re redeploying for Development and Redev financing. Management teams were emphatic about the rich cost of acquisitions, reiterating creative solutions to maximize shareholder value in this environment. Redevelopment supports the idea of not having to go outside of your portfolio for growth while maintaining the delicate balance between supply and demand. Additionally, management teams made a point of rehashing the current disconnect (or gap) between private market property and public market equity valuations.
Not your usual suspects: There was a large non-REIT dedicated investor presence this year. Some of our clients took 1X1 meetings with generalists for the first time at this forum. All these new faces are confirmation of the idea that generalists are doing their homework, meeting with REIT management as a necessary measure to learn about the intricacies of a REIT investment and obviate risk of entry. During Q&A segments there were clear examples of questions that came from unseasoned investors. Certain company presentations had the cadence of a general information session in response to this.
Break the internet: The rising popularity of e-commerce and p2p commerce is no secret. The effect that these channels are having on commercial real estate owners was the 800-pound gorilla in several company sessions. Retail and Lodging owners were tasked with addressing investors’ questions regarding the industry headwinds in this landscape. Sentiment around growth prospects was mostly positive. Retail owners were ardent about: the strength of consumer demand, strong releasing spreads/monetization of shadow supply, high occupancy rates, and robust redevelopment pipelines/ reinvestment in core assets. Hotel owners restated their competitive advantage over Airbnb as it relates to business travel. Additionally, they indicated the value of brand loyalty and how membership program’s benefits combat pricing pressure from OTAs.
Please don’t hesitate to reach out to Michael.Spector@nasdaq.com to discuss any of these key takeaways.
Also, check out my webcast on GICS Reclassification here >
Michael Spector is the Senior Analyst on Nasdaq’s Corporate Advisory Real Estate Team. He has had a specific focus on Real Estate for the entirety of his tenure, working with real estate companies of all cap sizes in a consultative capacity. Michael attended Arizona State University, Barrett the Honors College where he competed on the CLAS Academic Bowl Team and held a 4.0 GPA. Michael is a current member of the CFA Institute and the Wildlife Conservation Society.
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