Nareit's REIT Report Podcast

The REIT industry’s focus on the needs and concerns of its tenants will become increasingly important as a result of the coronavirus crisis, according to Gil Menna, co-chair of the REITs and Real Estate M&A practice at Goodwin.Speaking on the Nareit REIT Report podcast, Menna said one of the ways that REITs can be opportunistic in the current environment is by focusing on unique ways to deal with tenancy concerns that evolve from the pandemic.“Trying to attract tenants back to [real estate] space, using the space in a way that’s novel and useful to tenants to addresses their needs and concerns—and helping them psychologically become productive again—will be an important part of the opportunity set available to REITs,” Menna said.

Nareit Senior Economist Calvin Schnure said that while the April jobs report was “clearly a shock to the economy,” the bulk of job losses were confined to a few sectors facing complete shutdowns.In the May 11 edition of the REIT Report, Schnure noted that the April report showed a record decline in employment while the unemployment rate jumped to 14.7%, the highest level since the Great Depression. However, the data are “less alarming than we might have expected,“ Schnure said. He noted that 60% of the job losses were in sectors such as restaurants, doctors’ offices, and retail—which may be in a position to rehire at a later date.

The retail real estate sector is leading the way in terms of preparing for a post-COVID 19 return to more normal business operations, according to Nareit Senior Economist Calvin Schnure.Speaking May 4 on the Nareit REIT Report, Schnure pointed to the various new safety measures that Simon Property Group, Inc. (NYSE: SPG) has implemented in order to reopen some of its malls.“The retail sector and the shopping malls are not isolated, they’re just the first part of our economy that’s going to be dealing with a post-COVID world. They are pioneering the way so that people can interact safely together,” Schnure said.

A new small business loan program recently launched by Kite Realty Group Trust (NYSE: KRG) is trying to give its tenants a “bridge to the other side” during the current economic uncertainty, said Kite Realty chairman and CEO John Kite.In the May 1 edition of the REIT Report, Kite said the company is “on the front lines of this thing as it relates to the small business community.” The KRG Small Business Loan program will provide up to $5 million in total assistance and allow Kite’s small business tenants to request a loan amount of up to three months of operating expenses.Kite said the idea to assist the REIT’s tenants, who were having difficulty accessing the Paycheck Protection Plan, “gained steam very quickly inside the company.”The reaction to the program so far has been positive. “We fully anticipate looking to lend out as much as we can in this program,” Kite said.

The REIT industry’s “heavy footprint” in non-traditional asset classes gives it a clear advantage as the world adapts to new ways of living in response to the coronavirus crisis, said Scott Crowe, Chief Investment Strategist at CenterSquare Investment Management.Speaking April 30 on the Nareit REIT Report podcast, Crowe said the crisis “ushers in a whole new paradigm of what real estate really is,” especially the idea of core versus non-core real estate. “The reality is that the way we live our lives is going to evolve significantly,” he noted.One of the advantages that the REIT industry has is its “heavy footprint” in non-traditional asset classes, such as data centers and towers, Crowe said. He noted that the industry has “a much higher proportion of winners than losers as it relates to what the post-COVID-19 real estate new normal may look like.”

While REIT share prices drifted lower in the past week, conditions appear to have settled somewhat compared to the large swings seen in the early weeks of the coronavirus crisis, said Nareit Senior Economist Calvin Schnure.Speaking April 27 on the Nareit REIT Report podcast, Schnure pointed to single digit moves in the past two weeks. One possible reason for the more restrained movement is the approach of first quarter earnings, he noted: “There could be a lot of investors who are in a wait-and-see mode.”Looking at real estate markets overall, Schnure highlighted the release of CoStar data showing demand weakened considerably across all major property types, despite social distancing going into effect only in the closing weeks of the quarter. Net growth of demand for office space was at its lowest level since 2010, and net demand for retail space fell due to store closures, the first decline since 2009.

Bill Bayless, CEO of American Campus Communities, Inc. (NYSE: ACC), said the REIT is helping its student residents weather coronavirus-related disruption by ensuring they have a home during the crisis, regardless of their ability to pay rent on a timely basis.Speaking April 23 on the Nareit REIT Report, Bayless said the company’s Resident Hardship Program ensures students can complete their online education in an academically oriented environment without facing late fees, online payment fees, financially-related evictions, or any negative impact to their credit reports if they and their families are facing financial disruption.To date, 2,787 residents have applied under the program out of more than 100,000 residents, Bayless said. In April, the company abated $1.6 million in rent and has already abated $400,000 in rent for May.Bayless said American Campus is “very pleased and optimistic about the return to campus in the fall by students, even if classes are going to be held online.” To date, the REIT’s portfolio is about 76% preleased for the fall, and in the 30-day period after March 16, it had 5,000 students lease to return in the fall. Lease cancellations for the fall are actually slower than in prior years, he noted.

A Nareit survey of April rent collection across the REIT industry points to a strong performance by industrial, multifamily, and office REITs.Nareit Executive Vice President for Research and Investor Outreach John Worth told the REIT Report April 22 that industrial REITs saw 99% of typical rents received in April. The survey was conducted between April 8-15.Multifamily REITs collected 93.5% of typical April rents, while office REITs collected 89.3% of typical April rents. Worth noted that there had been uncertainty as to how office REITs would fare, but “the fact that nearly 90% of rents have been paid does reflect the strong credit quality of REIT tenants.”Health care REITs collected 85.7% of typical April rents, while shopping centers collected 46.2%.

On the 50th annual Earth Day celebration, Nareit Senior Vice President for ESG Issues Fulya Kocak said the social aspect of ESG is likely to see greater focus as a result of the coronavirus crisis.Speaking on the Nareit REIT Report podcast, Kocak said that while attention to social matters was already gaining a lot of interest before the crisis, “after we return to our new normal we are going to see more focus on health and wellness as well as flexibility and adaptation of the workforce to different ways of getting things done.”Kocak also commented on the upcoming Nareit ESG annual report, which will highlight the increased reporting underway by REITs. “There has been good progress made on the transparency aspects of ESG,” she said.

Kimco Realty Corp. CEO Conor Flynn said the REIT’s large national retail tenants need to pay their rent so that financial assistance can get to where it is needed most—small shop retailers.In an April 15 REIT Report interview, Flynn—who was recently diagnosed with COVID-19 and suffered mild symptoms—outlined the REIT’s efforts to help its ‘mom and pop’ tenants, including rent deferral and its new Tenant Assistance Program (TAP).Flynn said TAP’s aim is to help its smaller tenants “bridge to the other side of this” by offering free legal services to help them navigate federal and statewide assistance programs. So far, over 1,700 tenants have taken advantage of TAP and Kimco continues to try and get more tenants to actively use it. “Time is not on the side of our small shop retailers,” he said.