Michael Torres, CEO of Adelante Capital Management, joined REIT.com for a video interview at REITWorld 2012: NAREIT’s Annual Convention for All Things REIT at the Manchester Grand Hyatt in San Diego.
Torres offered his thoughts on the differences between the REIT approach to real estate investment and private forms of investment.
“I think the reality is that access to capital is king right now in this marketplace. Clearly, the REITs over the last three years have demonstrated that they can tap not only the equity market, but the bond markets have been reopened to them. The lenders at the direct asset level are certainly interested in them,” Torres said. “I think it has gotten harder for private players to aggregate capital today, and that’s the differentiation, but I think investors are interested in both forms of real estate.”
Torres said that even with the industry’s record of outperformance in the last two years, the REIT market still has room for increased returns.
“Clearly there are some headwinds as the economy adjusts to fiscal changes, but I think fundamentals are good. The surprise, really, is around the lease structure that we get in real estate, so I think 2013 will be pretty good, actually,” Torres said.
When asked about specific REIT sectors that may be undervalued in the current market environment, Torres pointed to multifamily REITs.
“The most frustrating part of the market is that it certainly does take different views in the short term,” Torres said. “Apartments have been lagging this year while the fundamentals have been quite good. Part of that is the macro trade, where people feel that housing is coming back and renters are going to move out and move into single family homes.”
Torres said the “resilience” of REITs will be one of the big stories in the industry next year.
“We have the lease structure. It’s in place. Tenants are committed. The occupancy is there. If you look at small business confidence, it’s still reasonably high. People want to make money,” he said. “They need space to be able to do that.”