Nareit's REIT Report Podcast

INDUS Realty Trust, Inc. (Nasdaq: INDT) President and CEO Michael Gamzon says the REIT’s focus on logistics real estate in high growth, supply-constrained markets with multiple drivers of demand positions the company well to respond to changes in supply chain strategies.INDUS recently elected REIT status and changed its name from Griffin Industrial Realty. Speaking on the REIT Report, Gamzon said the company chose to convert to a REIT in part because it “aligned with the business we’re in,” as well as allowing INDUS to seek out capital in order to be an active developer and acquirer of assets.INDUS’ core markets are: Hartford, Connecticut; Lehigh Valley, Pennsylvania; Orlando; and Charlotte, North Carolina. Gamzon described Lehigh Valley as “one of the best performing markets in the country.”

Nareit’s 2020 Leader in the Light Awards highlighted a strong field of companies that have worked hard during the pandemic to put their tenants’ needs first, while also reducing their energy, water, and waste output, according to Cliff Majersik, senior advisor for policy and programs at the Institute for Market Transformation.Majersik served as a judge for the 2020 Leader in the Light Awards. He noted that REITs have put a premium on making their buildings comfortable, productive, desirable, and above all—safe for their tenants.

The increased adoption of automation technology within logistics real estate will help ease the shift toward more resilient, just-in-case supply chains, according to Melinda McLaughlin, vice president and global head of research at Prologis, Inc. (NYSE: PLD).Speaking on the REIT Report, McLaughlin said the shift in supply chain format will put an intense strain on the amount of available supply of property. “Automation can help customers adapt to that and incorporate that move to more resilient supply chains, without necessarily being limited by the amount of labor or logistics real estate out in the market,” she said.McLaughlin noted that the level of automation adoption in logistics real estate is increasing but is lower than most people think. Only about 20% of warehouse facilities incorporate more advanced types of automation, and that’s highly concentrated toward e-commerce facilities due to their labor intensity, she said.

David O’Reilly, CEO of The Howard Hughes Corporation (NYSE: HHC), said the REIT has an “unparalleled opportunity” to continue to drive net asset value (NAV) growth over the next several years and decades.O’Reilly was named CEO at the start of December, after serving in that position on an interim basis since September.Speaking on the REIT Report, O’Reilly attributed the growth potential to increased demand for mixed-use live, work, play communities, coupled with over $1 billion of liquidity on the company’s balance sheet.

Recent news on commercial real estate valuations reflect growing confidence that the sector will start to recover in 2021, said Nareit Senior Economist Calvin Schnure.Speaking Dec. 7 on the REIT Report, Schnure noted that valuations appear to be more stable than they appeared a few months ago, when the sales prices of properties that were being sold showed a big discount. Volumes at that time were light, though. “As we get a better look at the market, the valuations reflect a bit more confidence that the real estate markets will recover next year,” Schnure said.Overall, Schnure noted that real estate is holding up quite well in the current environment, with rent collections recovering as businesses open up, “but obviously there are still strains.”Turning to the broader economy, Schnure noted that while it appears to be slowing, “we’re not at risk of a stall.”

David Veal, chief investment officer for the City of Austin Employee’s Retirement System (COAERS), joined guest host Meredith Despins, Nareit senior vice president, investment affairs, for a special edition of the REIT Report to discuss how investing in a completion portfolio using REITs is delivering value to the pension system’s real estate investment portfolio.Pension funds have long recognized the important role real estate plays in diversified investment portfolios. However, over the past 20 years, the real estate economy has expanded beyond the property sectors institutional investors have traditionally invested in—like retail, office, residential, or industrial. Today’s REIT industry reflects that evolution and offers investors access to a diversity of property types, including the new economy property sectors like infrastructure, cell towers, data centers, and networked logistics properties that house the growing digital economy. This rise of 21st century real estate has prompted institutional investors—such as COAERS—to adopt a portfolio completion strategy. A portfolio completion strategy is a tool investors have to invest in property sectors, including new economy sectors, that complement the traditional real estate property types in order to achieve more robust diversification, boost portfolio investment returns, and dampen volatility.

STORE Capital Corp. (NYSE: STOR) President and COO Mary Fedewa says that after six years as a public company, the net lease REIT has “barely scratched the surface” in terms of tapping potential opportunities for growth.Speaking on the REIT Report, Fedewa said STORE continues to see trends “driving more net lease activity, as companies recognize the benefit of using their own capital to grow their business rather than to hold real estate.”Fedewa said that with over 200,000 companies within its target market, STORE sees plenty of runway for growth. “Opportunity is so large that it allows us to be highly selective and to focus on investment opportunities that are accretive to our shareholders, regardless of market conditions,” she noted.

REIT share prices, buoyed by positive developments with regard to progress on a COVID-19 vaccine, ended last week at their highest levels since the start of the pandemic, according to Nareit Senior Economist Calvin Schnure.Speaking Nov. 16 on the REIT Report, Schnure noted that news that Pfizer trials showed a success rate of 90% sent REITs sharply higher, especially for those sectors most impacted by the pandemic.Lodging and resort REITs were up 31% on Nov. 9 alone, while retail REITs were up nearly 20%. REITs closed out the week at the highest Friday close since March 6.

The DLA Piper annual survey of real estate executives cites the availability of capital looking to invest in commercial real estate as a reason for optimism in the current environment.Speaking on the REIT Report, John Sullivan, U.S. chair and global co-chair of DLA Piper’s real estate practice, said “the fact that there are folks out there with money to invest—and actually we’re seeing some increases now in investment—is a reason for some optimism.”The survey showed 58% of respondents citing an abundance of available investment capital as the top reason for an optimistic economic outlook, an increase of 15 percentage points from the 2019 survey. Sullivan pointed to recent estimates of around $400 billion in available institutional capital looking to invest in commercial real estate.

Gaming REITs whose tenants are investing in online gaming (iGaming) platforms are expected to benefit from increased downside protection, according to Spenser Allaway, an analyst on Green Street’s research team and sector head of net lease, gaming, and self-storage.Speaking on the REIT Report, Allaway said downside protection for the gaming REITs will be in the form of improved underlying tenant credit.The three primary gaming REIT tenants are: Penn National Gaming, a tenant of Gaming and Leisure Properties, Inc. (Nasdaq: GLPI); Caesars Entertainment, the operator for VICI Properties Inc. (NYSE: VICI); and MGM Resorts, a key tenant of MGM Growth Properties LLC (NYSE: MGP).“All of these tenants have made sizeable investments to establish an online presence,” Allaway said.