As published in PREA Quarterly, Spring 2023
Public and private real estate markets can diverge, as they did last year. Although the increased uncertainty associated with such dislocations may be unsettling, these environments provide investors with tactical and strategic investment opportunities. With REIT implied capitalization (cap) rates significantly higher than private real estate transaction cap rates, the attractiveness of public equity REITs has increased. Today, REITs offer investors access to institutional-quality properties with best-in-class operators at substantially discounted prices relative to the private market.
Though past performance may not be indicative of future results, a review of historical public and private real estate market divergences shows that significant public-private property dislocations can also be harbingers of future REIT total return outperformance.
To read the full story, visit PREA Quarterly (pdf).