Research firm Green Street Advisors is known for its REIT market analysis, but the firm announced plans in March to expand its commercial real estate coverage into the private market.
Andrew McCulloch, who has covered the residential sector for the Newport Beach, Calif.-based firm for eight years, will lead the new private market research group.
McCulloch spoke to REIT.com about Green Street’s reasoning behind establishing the new group and its goals.
REIT.com: What prompted Green Street to create its new private market research program?
Andrew McCulloch: Eighty-five percent of U.S. commercial real estate is not owned by public REITs, and we realized there are tremendous opportunities to better serve this segment of the market. There are currently many providers of real estate data, but few providers of high-quality research. This high-quality void is what we aim to fill.
Our goal is to leverage off our 25 years of broad real estate experience and combine that with the insights the public market provides to generate thoughtful, insightful research and analytics that will help our private market clients make better investment decisions. Our private market work will help investors determine where they should buy and sell assets. It will also serve as a helpful tool to determine which property types offer the best risk-adjusted returns as market conditions change.
REIT.com: What do you hope to accomplish in this new role?
McCulloch: We are too often thought of as just “REIT Guys.” We remain very much dedicated to serving the needs of REIT investors and being an advocate for REIT best practices, but we are also much more than that today. We do such extensive work behind the scenes of our REIT product analyzing the fundamentals of the various property sectors and geographies that we believe we can really expand our value proposition by getting more of that proprietary research, data and analytics into a more formalized product.
A beefed-up and expanded private-market research offering will also undoubtedly add value for our existing REIT investor clients as well.
REIT.com: What are some of the issues that the new group expects to study?
McCulloch: Most private investors probably don’t care if we have a “buy” recommendation on a company’s stock, but they do care how we value that company’s portfolio, how we view the growth prospects in their markets and how we assess the prospects for their development platform. They also care how we view valuations in a sector in general, and not just versus the other major property sectors, but also versus stocks and bonds. Understanding and valuing real estate in the context of the broader capital markets will be a core mission of the new product.
REIT.com: How about new products and services offered as a result of the new Private Market Research program?
McCulloch: We have tons of proprietary analytics that should be immensely valuable to any real estate investor. These include commercial property price indices, capex studies, and cap rate and unlevered return expectation time series across all the major property sectors. And beyond valuing the sticks and bricks, we have done extensive work on executive compensation, corporate governance and optimal capital structures for real estate companies.
This new initiative is to build a suite of products and services that more effectively gets these value-add analyses into the hands of our clients. We will certainly bring on some additional employees to help this effort, but the new product with also leverage heavily off Green Street’s already deep bench of 30 full-time research analysts.