Nareit's REIT Report Podcast

This episode of the REIT Report’s ongoing series “Building to Zero” features Ben Myers, senior vice president of sustainability at BXP (NYSE: BXP) and continues to dig deeper into the real estate industry’s journey to reduce emissions from the built environment.Myers shares his view on why it is so important to take a long term view on electrification, which refers to the replacement of fossil fuel equipment, like internal combustion engines and gas boilers, with electric motors or heat pumps.The common case for electrification is that building owners can decarbonize and utilize equipment that is significantly more efficient. “Electrification of everything is what I'm here to talk about today. And in particular, how to spread this religion around electrification. I am a believer that we need to electrify the built environment and I'll explain why, but I do think that we need to take some important steps to get there,” Myers says.

Matt Werner, senior portfolio manager for REITs at Chilton Capital Management, was a guest on the latest episode of Nareit’s REIT Report podcast.Werner emphasized the resilience of public REITs amid economic challenges, especially in managing debt maturities and maintaining dividend payments during periods of uncertainty.According to Werner, public REITs are now positioned to capitalize on market volatility, with robust balance sheets enabling them to acquire distressed properties. "We're still kind of waiting for the sort of big moment for public REITs to go out and make significant acquisitions or for private companies to bite the bullet and decide that going public is the only kind of way to save their company."

Bill Hughes, managing director of liquid strategies at DigitalBridge Investment Management, was a guest on the latest edition of the Nareit REIT Report podcast.Hughes discussed some of the trends and developments in digital infrastructure and real estate securities markets today. He noted that the types of real estate businesses that get characterized as digital infrastructure currently compose around 40% of the publicly traded real estate market by value. “That's something that was not true a decade, a decade and a half ago.”When analyzing digital infrastructure, the same issues that impact traditional real estate—such as supply and demand dynamics, unit level economics, the capital intensity of the asset over time, lease structures, and credit counterparties—should all be considered, Hughes said.

Elisabeth Troni, fund manager with CBRE IM’s flagship global investment strategy, was a guest on the latest episode of Nareit’s REIT Report.CBRE IM’s flagship global strategy began to allocate to listed REITs in December 2022. Troni explains the timing behind that decision and the scope it gave the strategy to access niche and specialized property sectors.Since December 2022, the strategy has entirely invested in an actively managed but broadly diversified strategy, Troni said. She added that the addition of a completion strategy, which would unlock opportunities in those specialty sectors, is currently under review.Troni noted that while the market is unsure about when rate cuts may occur, “what we do feel confident about is the fact that higher rates are priced into public markets in terms of the pricing levels, and they have a strong chance to outperform when the market can see the end of rising rates.”

Steve Loffman, managing director at Raymond James, was a guest on the latest episode of Nareit’s REIT Report podcast. Loffman is also a program director and speaker at Nareit’s REITwise: 2024 Law, Accounting & Finance Conference in Hollywood Florida, March 19-21.Loffman described the contours of the REIT capital market landscape today, noting that broadly speaking, “it's been a little bit challenging,” with REITs trading at a discount to net asset value (NAV). “But as time moves on, and if we believe in the yield curve, which I certainly do, I think we'll be making strides to get closer to NAV from an equity perspective,” he added.

This episode of the Nareit REIT Report’s ongoing series, “Building to Zero,” features Dana Schneider, director of energy and sustainability and ESG at Empire State Realty Trust, Inc.(NYSE: ESRT) and continues the discussion related to the real estate industry’s journey to reduce emissions from the built environment.In this episode, Schneider shares how ESRT began the journey on decarbonization more than 15 years ago by focusing on making the business case for deep energy retrofits.“By creating a process and publishing our energy and financial modeling, we showed what every step of the process would look like and demonstrated that we could have a guaranteed savings of 38% with a payback of three years. Frankly, it's better than we thought it would be,” Schneider says. “But more important than just the results was the idea that we could share the process and show what did and didn't work, how to do the right steps in the right order, how to work from the outside of the building in.”

Tony Edwards, Nareit’s senior executive vice president, was a guest on the Nareit REIT Report® podcast. Edwards will be retiring from Nareit at the end of March, and in this episode he reflects on some of the highpoints of his career and the major changes in the industry during the past three decades.Edwards said he expects to see more private real estate shift to the public market over time, pointing to the benefits REITs offer in terms of market discipline, low leverage, and their ability to weather market disruptions such as the great financial crisis and the pandemic.

Three members of Citi’s global real estate research team—Nick Joseph in the U.S., Aaron Guy in the U.K., and Howard Penny in Australia—were guests on the latest episode of the Nareit REIT Report podcast. Amid the market cross currents of slower global economic growth, offset to some extent by anticipated lower interest rates, “we are generally constructive on commercial real estate in 2024,” Joseph said. At the same time, Citi’s 2024 global real estate outlook also stresses the importance of stock picking, rather than broader sector and subsector allocations.For the U.S., Citi is projecting total returns for REITs of 10% to 15% in 2024, with adjusted FFO growth of about 3%. “Growth is being driven by slowing but still solid operating results, development and the redevelopment benefit that is coming on, and the retention of free cash flow,” Joseph said.

Travis McCready, head of life sciences, Americas markets, at JLL, was a guest on the latest episode of Nareit’s REIT Report podcast.McCready said 2023 was one of the most challenging years in memory for life sciences real estate due to a slowdown in the deployment of venture capital, higher interest rates and inflation, and “rather aggressive” real estate development of lab space in the past two years.Based on activity so far in 2024, though, “the year is already shaping up to be much more positive than the year before, so fingers crossed that we are looking at a return to an upwards trajectory in the months and year to come,” McCready said.

Laurel Durkay, head of global listed real assets at Morgan Stanley, was a guest on the latest edition of the Nareit REIT Report podcast.Durkay said REITs today are “cheap” versus broader equities. “They do screen attractively versus private real estate. They look compelling versus where REITs have historically traded, and they look pretty fairly valued versus fixed income. The macro backdrop is favorable with interest rate stabilization and the increasing likelihood of cuts this year… I think valuations look attractive.”Despite this backdrop, negative rhetoric about the real estate sector “and the potential for the other shoe to drop” persists, Durkay said. “Investors in Europe and Asia really do want to learn more about real estate, but it's hard to move past that conversation of the fate of offices in big U.S. cities like New York and San Francisco,” she noted.