Frank Haggerty, portfolio manager with Duff and Phelps Investment 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.
Duff and Phelps, headquartered in Chicago, has more than $8.8 billion in open and closed end funds and institutional assets under management. In addition to REIT funds the company invests in infrastructure and utility companies and in the development and management of focused investment strategies for specialized clients.
Haggerty discussed three key areas in which his clients’ perceptions of REITs may have been enhanced or changed over the past few years given the current market climate. He said the liquidity of REIT shares, quality of their assets and cost of capital advantage have all helped boost the perception of REITs.
“Liquidity has always been a part of the REIT story. An important lesson learned over the years is just how important that liquidity can be. Both from the buy and sell side, that’s definitely grown in appreciation,” he said.
When it comes to new development, while the apartment sector is ramping up its pipeline, Haggerty said he expects moderate development across a number of sectors in the coming years. While there will be new construction, financing continues to be difficult.
“We’ve seen minimum supply across the various property types,” he said. “Clearly, relative to historic levels, the amount of development we are seeing, even within apartments, is fairly minimal.”
However, Haggerty said he expects that there will be some new development in the industrial and retail sectors, as well as some of the specialty areas, such as factory outlets and data centers.
In terms of trends that could particularly impact REITs, Haggerty noted that the rate on investment-grade bonds is key for investors.
“Investment-grade bond yields are at near historic lows. You have to go all the way back to the early 1950s or 1960s to find a comparable time where the cost of debt capital is as low as it is today,” he said. “Right now it's a strong tailwind, and we hope it stays that way going forward.”