REITWorld 2014: Capital Flows into REIT Sector Remain Robust, Panelists Says

Capital flows into the REIT sector from domestic and international investors remain robust, according to a panel of industry figures at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT.

The panelists also said the limited supply of real estate assets is pushing valuations higher.

“Capital is chasing a relatively few number of assets,” said Louis Taylor, senior vice president at Paulson & Co., Inc. “Prices are fair to pretty full.”

Taylor noted that the relative growth of the U.S economy compared with foreign markets “is attracting capital from around the globe into all forms of U.S. assets.”

Jon Bortz, chairman & CEO of Pebblebrook Hotel Trust (NYSE: PEB), noted that the availability of quality product in the lodging sector is “modest.”

“We’ve worked our way through the vast majority of troubled assets,” Bortz said. Competition for assets has increased each year since Pebblebrook went public in 2009, said Bortz, adding that a large source of competition is coming from private equity investors focused on value-added real estate.

Timothy Pire, managing director at Heitman LLC, observed that allocations to real estate have increased around the globe, particularly among pension funds. Going forward, Pire said he anticipates that increased capital flows will come into real estate via the defined contribution market.

Vivek Seth, managing director and head of real estate investment banking with Raymond James, moderated the panel and commented on the potential impact of higher interest rates. He said that in light of the increased capital flows into the REIT industry, REITs should still benefit from relatively lower rates.