Burland East, CEO of American Assets Investment Management, spoke with 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.
American Assets Investment Management is a San Francisco-based firm that offers an analysis of securities, markets and companies. The company currently manages approximately $925 million and has exposure to domestic and non-U.S. fixed-income and equities.
East said investors should feel confident about the REIT sector and its future prospects. He pointed to the sector’s outperformance as a positive factor influencing investors.
“REITs have been well rewarded over a long period of time,” he said. “We believe that most institutional and retail investors are best served by seeking an allocation in real estate through REITs, largely because most REITs have transparency, liquidity and governance.”
East reflected on 2012 and also offered his thoughts on 2013.
“We think we’re in a long term cyclical recovery in commercial real estate values, pretty much everywhere in the U.S, regardless of property type or location. Generally speaking we’ve been in a good year,” he said.
East predicted that there will be more of the same next year, especially with the same government in place.
“We have the same president, the same Senate and same House,” said East, adding that while Washington still needs to resolve the fiscal cliff issue, the same dynamics of modest growth and stagnant job creation are in place and should continue.
As a result, he said his firm is more interested in REITs that are more defensive, such as health care, lab space and data centers, because they don’t depend on economic growth to fuel funds from operation (FFO) growth.
One economic indicator that East said is worth keeping an eye on is inflation.
“We are at the end of a 30-year bull market in bonds. When I entered the business in 1982, interest rates were 14 percent. Today, they are effectively zero, and we’ve had this tailwind,” he said. “So, if you get a time where you have creeping inflation, that would be something that investors need to think about.”