301. Your 2025 REIT Playbook with David Auerbach, Hoya Capital
Jan 14, 2025
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David Auerbach, Chief Investment Officer at Hoya Capital and a veteran of the REIT industry, shares insights on navigating the current and future landscape of Real Estate Investment Trusts. He emphasizes the importance of long-term strategies and dividend growth, exploring current trends like single-family rentals and the evolution of retail spaces. Auerbach also discusses how healthcare REITs adapt to demographic changes and the critical need for diversification in investment portfolios as we approach 2025.
David Auerbach discusses the influence of interest rates on the REIT sector's performance compared to traditional investments like the S&P 500.
The podcast emphasizes the importance of long-term investment strategies in REITs, highlighting dividend growth as a key focus for investors.
Auerbach shares insights on evolving sectors, particularly single-family rentals and experiential retail, which show promising growth opportunities toward 2025.
Deep dives
David Auerbach's Journey into the REIT Industry
David Auerbach's entry into the Real Estate Investment Trust (REIT) industry began under unexpected circumstances. After getting fired from his position as a retail financial advisor over a disagreement about networking, he serendipitously found a job with Green Street Advisors, a renowned REIT research firm. This experience allowed him to witness significant events in the REIT sector, including various market crises and the emergence of new property sectors. His unique perspective and hands-on experience during pivotal moments in the industry have shaped his insights into current market trends and sector evolution.
Current Trends in the REIT Sector
The podcast discusses how the REIT sector is heavily influenced by interest rates, which have led to a significant underperformance when compared to the S&P 500. Auerbach highlights the correlation between REITs and the 10-year Treasury yield, emphasizing that higher yields in bonds make them more attractive than REIT investments. Despite recent struggles, there remains a belief that as revenues increase and expenses decrease, there is potential for REIT dividend yields to rise, thereby improving investment attractiveness. The dynamics in the market also suggest that while some sectors may be facing headwinds, others, such as single-family rentals, show promise due to market conditions.
The Long-term Investment Perspective
Auerbach emphasizes the importance of taking a long-term view when investing in REITs. Many investors are drawn to REITs for steady income through dividends, often viewing them as a long-term income-generating asset rather than a fast return. He cites Realty Income, known for its monthly dividends, as a stellar example of long-term growth potential. This long-term focus allows investors to benefit from the compounding of dividends over many years, fundamentally changing the potential financial landscape for individuals saving for retirement.
The Resilience of the Retail Sector
The retail sector is experiencing a renaissance, driven by innovation in tenant mix and consumer experience. Auerbach notes that retail landlords are adjusting strategies, such as breaking up large anchor spaces to introduce new tenants and diversifying offerings to create experiential retail environments. Traditional challenges posed by e-commerce are prompting retail spaces to evolve, focusing on tenants that cannot be replaced online, such as gyms and entertainment options. The growth of 'experiential' retailing blends shopping, dining, and entertainment to draw families and consumers into physical spaces.
Future Outlook and Strategic Considerations
Looking toward 2025, Auerbach shares insights into sectors poised for growth, such as data centers and single-family rentals. The income growth potential and increasing demand in these areas signal positive outlooks for investors. He also cautions that the real estate market's future remains complex, influenced by economic factors such as interest rates and inflation. The importance of diversification within real estate investments is highlighted, encouraging investors to spread their portfolios across various sectors to mitigate risks and seize opportunities in a fluctuating market environment.
In this special guest episode of The TreppWire Podcast, we are joined by David Auerbach, Chief Investment Officer at Hoya Capital to discuss the current state and future of the Real Estate Investment Trust (REIT) sector. David shares his
journey into the REIT industry, insights on market trends, and the importance of long-term investment strategies. He emphasizes the significance of dividend growth and the need for investors to understand the underlying dynamics of the REIT market. David also goes over the current state of the REIT market, focusing on the single-family rental sector, the evolution of retail, and the importance of healthcare REITs. We wrap up with a discussion on the need for diversification in REIT investments and the outlook for the sector leading into 2025.
Episode Notes:
- Introduction to REITs and David’s Background (0:19)
- Current Trends in the REIT Sector (07:25)
- Long-Term Investment Perspectives in REITs (13:14)
- The Power of Compounding Dividends (19:24)
- Understanding the REIT Market Dynamics (25:07)
- Exploring the Single-Family Rental Market (27:54)
