Nareit's REIT Report Podcast

High-quality office real estate in New York continued to attract investor interest throughout the pandemic, and the office market overall is “certainly improving,” according to Nadir Settles, head of New York office investment at Nuveen Real Estate.Speaking on the REIT Report, Settles noted that while there hasn’t been a lot of price discovery during the past year, the few transactions that did occur, notably for high-quality assets, did well. “Investors showed that they are willing to come to New York for the right product, even if it was office,” he said.Settles said the New York office market has seen about a 10% drop in rents, “which is not bad for where we thought we were going.” Tenant improvements have increased substantially, while concessions have been made to attract tenants, he noted. Tenants are ready to commit quicker on turnkey space, he said, but they also want flexibility on how the deal is structured.

In a REIT Report podcast interview, Robert L. Johnson discusses his early career, his business strategy, and his insights regarding race in America. Johnson is the founder and chairman of The RLJ Companies, LLC, which sponsored the formation of RLJ Lodging Trust (NYSE: RLJ), and the founder of Black Entertainment Television (BET).During the interview with Nathaalie Carey, Nareit senior vice president for industry affairs and social responsibility, Johnson discusses his coming of age at a time when the United States was “opening doors to Black Americans,” and his underlying belief that “you have an obligation to live up to the tenets of society to make the whole community better."

REIT industry ESG data continues to improve both in quality and quantity, yet the lack of standardization remains a challenge, according to Bradford Stoesser, senior managing director and global industry analyst at Wellington Management.In a REIT Report interview, Stoesser said REIT ESG data is “markedly better than even just a few years ago.”“We are starting to see a proliferation of data providers and while more ESG data is a positive, quality and standardization are important, allowing for effective comparisons,” Stoesser said. He noted that companies largely self-report, meaning that transparency is often lacking.Data providers, meanwhile, measure ESG differently and often are not clear in terms of the specific subcategories of E, S and G, and how they are measured, Stoesser explained. “The risk is that investors end up with very different impressions of a corporate’s ESG (information) based on the data they source,” he said.

The authors of a new book on REITs and real estate investment, Educated REIT Investing, say it is the first of its kind to target academic institutions, while still being concise enough to attract a general audience.The book is co-authored by Stephanie Krewson-Kelly, vice president of investor relations at Corporate Office Educated REIT InvestingProperties Trust (NYSE: OFC), and Glenn Mueller, a professor at the University of Denver’s Franklin L. Burns School of Real Estate and Construction Management, and a real estate investment strategist at Black Creek Group.The book updates Krewson-Kelly’s 2016 book, The Intelligent REIT Investor, and includes new chapters by Mueller. Nareit Senior Economist Calvin Schnure and Merrie Frankel, president of Minerva Realty Consultants, also contributed to the book.

With 100% of its ground lease rents paid in 2020 and newly-received investment grade credit ratings, Safehold Inc. (NYSE: SAFE) Chairman and CEO Jay Sugarman says the REIT is “really well positioned to keep growing.”Speaking on the REIT Report, Sugarman noted that despite the challenges of 2020, “last year actually proved how strong the business is.” Meanwhile, new ratings from Moody’s Investors Services and Fitch Ratings “will be a pretty major competitive advantage,” he added.Sugarman noted that when it comes to selecting particular property types, “our mission is to go where the best markets and land is.” Multifamily has been a “great story so far,” and represents about 25% of the portfolio, he said. “I imagine we’ll be in all property types in the top 30 markets in the next year or so.”

Social media site Clubhouse is emerging as a new and innovative way to facilitate education about commercial real estate and to provide networking opportunities for individuals across the industry, according to David Auerbach, an institutional trader at World Equity Group, Inc.Clubhouse is an invitation-only iPhone social media app launched in 2020 that enables users to join live audio discussions on a range of topics hosted in ‘rooms’ on the Clubhouse platform. Participants can enter the various rooms as an audience member and can join the conversation by digitally raising their hand to the host.Speaking on the REIT Report, Auerbach discussed his own involvement with Clubhouse, which includes hosting daily discussions on a variety of REIT and real estate-related topics with his partner, Yoni Miller.

Nareit’s T-Tracker fourth quarter 2020 data indicate that the REIT industry is recovering from its weakest levels seen during the pandemic.Speaking on the REIT Report, Nareit Senior Economist Calvin Schnure said the REIT industry is “showing a good continuing recovery, not a complete recovery, but a recovery from the worst part of the pandemic a year ago.”According to the T-Tracker, funds from operations (FFO) of all equity REITs gained 11.3% in the fourth quarter from the third quarter, which itself was 10.3% higher than the second quarter. The recovery is not uniform, Schnure pointed out. Earnings for sectors at the front line of the shutdown, such as lodging and retail, continue to be quite weak. Other sectors have benefitted, namely those that support the digital economy, as well as industrial.

Differences in how real estate sectors perform have never been as “profound” as they are today, according to Michael Sonnenfeldt, founder and chairman of TIGER 21, a peer membership organization of high net worth current and former entrepreneurs, investors, and top executives.TIGER 21 members collectively manage personal assets of over $85 billion.Speaking on the REIT Report, Sonnenfeldt described the current situation in real estate as a “tale of two cities,” with retail “in a difficult strait” and industrial “on fire.”Sonnenfeldt explained that real estate has been the number one asset allocation for TIGER 21 members since the group was founded in 1999—and is likely to stay that way. Currently, real estate accounts for 27% of TIGER 21 portfolios and is favored by members due to its unique benefits and member expertise in the field, he said.

Matt Ritter, senior research consultant for NEPC, joined guest host Meredith Despins, Nareit senior vice president, investment affairs, for a special edition of The REIT Report podcast to discuss how REIT-based investment can deliver access to a 21st century real estate portfolio.NEPC is an independent investment consultant and private wealth advisor. Its clients—including public pensions, corporate pensions, endowments, foundations, health care groups, and private wealth—collectively represent approximately $1.1 trillion in total assets. Ritter is a member of NEPC’s Real Assets Research Group and the Portfolio Construction Lead for the Real Assets Beta Group.Speaking to the challenges clients are facing in their real estate portfolios today, Ritter noted that many clients—particularly those with net outflows—are seeking durable income and are asking “what’s the future of my existing portfolio going to look like?”Historically, many institutional investors have accessed real estate through private markets, which focuses on the four main property types: Office, Apartments, Retail, and Industrial. “We’re seeing a pretty wide range of returns and expectation by property type. This was a trend that was evident prior to the pandemic, but has really accelerated over the past year,” he observed.

The data center industry holds a leadership position on climate change issues as technological advances create greater efficiencies while economies of scale result in a lower energy profile, according to Kyle Myers, senior director of environmental health, safety, and sustainability at CyrusOne, Inc. (Nasdaq: CONE).Speaking on the REIT Report, Myers pointed to estimates that 1-3% of the entire power consumed on earth is consumed within data centers.CyrusOne has set a goal of reaching zero carbon emissions by 2040 across the organization. Myers said innovation on the design side is “super important,” while CyrusOne is also looking at existing efficiencies across the portfolio, such as infrastructure and operational improvements.