01/13/2023 | by Sarah Borchersen-Keto

Mark Howard-Johnson is global head of real asset securities management at BlackRock and winner of the Nareit 2022 Industry Achievement Award, given annually to professionals serving the REIT industry who have helped heighten awareness and understanding of the value of REITs and publicly traded real estate.

Howard-Johnson was praised for his role in overseeing the creation of successful public real estate securities products and investment strategies for both retail and institutional channels in the United States and around the world.

What are some of the biggest changes you’ve seen in the REIT industry during your career?

Over the 30 years I’ve been in this industry, the public real estate companies have transformed from hard-to-understand, microcap entities into industry-leading, mid to large cap companies. The three major improvements/changes I would point to would be:

  • The REIT management teams have evolved and matured into some of the most professionally run public companies in any industry. When I first started analyzing the industry in 1993, these companies were run by senior leaders who had spent their careers in the private sector and that’s how they operated. They were exceedingly self-confident and insular, believing they still owned the companies rather than their shareholders.
  • Transparency. Today, for the most part, REIT disclosure sets the standard in the public markets.
  • Leverage is at historically low levels, providing much better security to the cash flow and dividends. When these companies first came public, many CEOs were used to running at significantly higher leverage levels as was the nature of the industry. Over time, leadership has realized the importance of financial flexibility.

Overall, how do you see the REIT industry positioned for 2023 in the face of uncertain economic macro fundamentals?

BlackRock’s Mark Howard-Johnson
BlackRock’s Mark Howard-Johnson

This is one of the things we’ve been most pleased by. Most REITs have elongated their debt maturities, fixed debt, and reduced debt, in addition to raising equity. Those steps have all been pretty powerful. I think in almost every metric we look at, most REITs should be better positioned. Payout ratios are at historic lows, leverage levels are at historic lows, and that will give companies flexibility coming out of this cycle—however deep it is.

Are there certain pockets of global opportunity that are attractive to BlackRock right now?

Because we have no visibility into how long or deep this cycle will be, what we’re really focused on is long-term secular trends. I would suggest any kind of communication REITs—towers and data centers—where you know the flow of information is going to increase, regardless of the cycle. Single-family homes for rent is another sector to watch because I think millennials care more about flexibility than they do homeownership, and obviously right now homeownership is pretty expensive.

Do you anticipate making changes to any of BlackRock’s sector allocations in the coming months?

We don’t take big sector bets. We’re fundamentalists and go bottom up, so we pick companies before we pick sectors. Sectors are hard to know because the pricing happens so quickly. We try not to be market timers, we’re long-term investors. We may be leaning a little away from the cyclically sensitive sectors right now, but that would be about it.