Panelists at Nareit’s REITweek: 2019 Investor Conference opening lunch general session discussed the state of the capital markets, agreeing that the real estate investment market is generally healthy, although REITs may still be impacted by a possible recession and trade tariffs.
Sandeep Mathrani, Nareit’s 2019 chair, vice chairman of Brookfield Properties, and session moderator, opened the discussion asking the panelists for their outlook on the economy through the end of the year. Panelists included Jeffrey Horowitz, global head of real estate, lodging and gaming at Bank of America Merrill Lynch; Brian Kingston, CEO of Brookfield Property Partners; Christy McElroy, senior equity research analyst at Citi; and Sarah Wade, senior vice president and co-portfolio manager at Nuveen Asset Management.
McElroy said it would be important to keep an eye on potential trade tariffs with China and Mexico, but noted that REITs also have strong balance sheets today compared with historical averages. Wade agreed, but said oversupply could still be an issue.
Turning to investor relations, Wade said REITs are more attractive than ever.
“If you look at active generalist investment, it’s doubled from 2012 to today,” Wade said. “But at the same time, we’re also seeing that massive rise in passive investment as well.”
Meanwhile, Mathrani asked the panel if REITs with a “tremendous amount of liquidity” should buy complementary businesses.
Wade didn’t think so, and instead advised that retail REITs reinvest in their businesses. “I don’t know that getting bigger from an asset base just to get bigger ever makes sense, and certainly not in this environment,” she said.
Turning the discussion to activism, Horowitz said he has always believed in it, but that what has become more prevalent in the REIT industry in the last several years is a group of investors who are only focused on it.
“There’s part of me that says it’s good because some of these activists have been out there [for some time],” Horowitz said. “I’ve seen activists also out there who say things that are completely untrue, and they raise a tremendous amount of attention and cause confusion as well.”
Mathrani asked the panel what the game-changing trends would be for the REIT industry moving forward. McElroy said self-driving cars and blockchain are poised to have a big impact, while Wade said technology disruption is the issue to watch.
The panel added that although REITs are in the midst of the industry’s longest running bull market, some economists are predicting a recession for later this year that could impact the REIT market.