Nareit's REIT Report Podcast

After steep share price declines across the REIT industry in recent weeks, a more moderating pattern appears to have set in, according to Nareit senior economist Calvin Schnure.In an April 13 REIT Report podcast interview, Schnure noted that REITs are down 13% to 15% this year, representing a significant discount. However, “the markets appear to have settled into a middle range. You’re no longer seeing the very sharp declines that we saw in March and they’re looking forward to the period when this virus is more under control and the economy can get back to work—commercial real estate included.”Schnure noted that REITs made gains in the prior week, and outpaced the S&P 500, as the sector was boosted by Federal Reserve policy provisions to support real estate if tenants fail to make rent payments.Schnure also commented that a range of factors are influencing investor sentiment, and those factors all reflect different time frames. For instance, public health news is determined by the measures taken several weeks ago to limit the spread of the coronavirus, while the unemployment news is more closely tied to what’s going on today in the economy. At the same time, policy measures by the Fed and proposals for further stimulus point to the future.

Ric Campo, chairman and CEO of Camden Property Trust (NYSE: CPT), said that while April rent collections have slowed somewhat in the past week, “generally we feel pretty good about where we are” in terms of residents’ ability and willingness to pay rent.In an April 9 REIT Report interview, Campo discussed the REIT’s efforts to help its residents weather the crisis, including the establishment of a $5 million tenant relief grant. He explained that Camden wanted to help fill the gap between when a resident might have lost a job and the receipt of federal benefits.“Business should focus on being a real partner in the community… it’s just the right thing to do to help people when times are tough,” Campo said. He noted that there was more demand for the grant than expected, with the entire $5 million amount allocated in about 16 minutes. Checks were sent out to residents within 24 hours of their grant applications being approved, he noted.

The lodging sector was one of the first industries to feel the economic brunt of the coronavirus crisis, and it will likely be one of the last to benefit from an eventual upturn, Pebblebrook Hotel Trust (NYSE: PEB) Chairman and CEO Jon Bortz said.Speaking April 9 on the REIT Report podcast, Bortz said about half of the hotels across the industry have now closed completely, with millions of employees furloughed. “We think it’s going to be a very slow recovery,” he said.By the end of March, operations at all but eight of Pebblebrook’s 54 hotels had been suspended and over 7,500 employees furloughed. Meanwhile, costs have been cut at the corporate level, with executives volunteering to either reduce or forego their compensation. Pebblebrook has cut back on capital projects and drawn down its line of credit completely. “We’re sitting on a little over $700 million that should allow us, with a fairly significant cash burn, to get through the better part of next year,” Bortz said.Bortz, who is 2020 chair of the American Hotel and Lodging Association, also described some of the advocacy efforts the group has conducted.

Nareit Senior Economist Calvin Schnure said in an April 6 REIT Report podcast interview that uncertainty surrounding the coronavirus and its impact on the economy and markets will remain high, certainly through April and likely into May.Schnure also noted that while REITs and broader stock indices are at a deep discount compared to pre-crisis levels, they are up from lows reached several weeks ago.Investors seem to be anticipating that the policy actions taken so far, notably the $2 trillion fiscal stimulus as well as Federal Reserve measures to support financial markets and make sure they continue to function smoothly, are going to help a lot of households and businesses, Schnure said. “Investors seem to anticipate these measures are going to buffer the economy and the markets from some of the worst scenarios,” he noted.

The April 2 edition of the REIT Report podcast featured Walt Rakowich on the topic of leadership during a time of crisis. Rakowich became CEO of ProLogis at the height of the economic downturn in 2008 and restored the company’s finances, enabling it to merge with AMB Property Corp. in 2011 to create Prologis, Inc.Rakowich noted that while every crisis is different, “how and why we lead is actually quite consistent.”During a crisis, a leader needs to understand that people are watching and listening even more intently than when things are going well. “How you deal with situations, how you communicate, what you say, how you treat people—all of those things matter,” he said.

In the March 30 edition of the REIT Report podcast, Nareit Senior Economist Calvin Schnure highlighted the latest developments in how the coronavirus crisis is impacting the economy and commercial real estate.Schnure noted that public health officials are indicating that “we need to prepare for a long haul,” which in turn is increasingly impacting cash flows for businesses and wages and incomes for workers.The first hard data on the magnitude of the effect came last week as initial jobless claims soared to a record 3.3 million, but “even this number understates the true impact,” Schnure said. The unemployment rate is likely to rise from 3.5% to 7.0% and is probably heading to 10% or higher in coming weeks, he added. “This is a major challenge for us in the months ahead.”

CBRE Chief Global Economist and Head of Americas Research Richard Barkham and CBRE’s Head of Occupier Research, Americas, Julie Whelan, joined the REIT Report on March 27 to talk about the economy, commercial real estate, and the impact of the coronavirus pandemic.Barkham described the economic impact as “brutal in the short term,” with GDP in the United States likely to contract by 6.3% in the first quarter and 20% in the second quarter. If new COVID-19 infections begin to fall by mid-to-late April, and lockdown situations start to ease from mid-May, “we’re looking to an improved second half and a very strong 2021,” he said.Fundamentals in the real estate sector were strong heading into the crisis, Whelan observed, as she pointed to solid occupancy levels and a disciplined approach to construction. “All of that has set us up to weather the storm that we’re in quite well,” she said.

In the latest edition of the REIT Report podcast, Nareit Senior Economist Calvin Schnure said the ultimate economic and financial impact of COVID-19 will be unclear until there is more progress on the public health front. Authorities, meanwhile, are acting quickly to support the economy, including the resurrection of the Federal Reserve’s crisis programs, Schnure noted.“The most important impact on the economy is the short-term cash flow problems for businesses that rely on face-to-face interactions with the public…it is encouraging that authorities are acting quickly to support the economy through this period,” Schnure said.

In the latest edition of the Nareit REIT Report podcast, Chris Caton, global head of strategy and analytics at Prologis, Inc., discussed the impact of COVID-19 on the warehouse and logistics industry.The current uncertainty is likely to be a headwind for the economy and all forms of real estate, logistics real estate included, Caton said.Caton pointed out that logistics real estate has benefited from historic low vacancy rates and strong demand and disciplined supply. Potential customers who have had a difficult time securing space up until now may see that situation change, he said.Investors, meanwhile, are likely to recognize “the relative beneficial attributes of logistics real estate in terms of the long-term demand drivers against other categories that have more uncertainty,” Caton said.

In the latest edition of the Nareit REIT Report podcast, Nareit senior economist Calvin Schnure highlighted the latest developments surrounding the impact of the coronavirus pandemic on the economy and REITs.Schnure emphasized that this is first and foremost a public health crisis, but also one which is impacting the economic and financial livelihood of tens of thousands of people.The situation is changing quite rapidly, Schnure said. He noted that his analysis as of March 12 is different from what it was just a few days ago.Schnure noted that a pandemic of the current scale hasn’t been seen before in modern history.“The experience in several other countries …is that it is possible to slow the spread of this virus and that will limit the effect on the economy, commercial real estate, and REITs,” Schnure said.