More Real Estate Consolidation “Inevitable”

Rich Moore

In the latest episode of The REIT Report: NAREIT's Weekly Podcast, longtime REIT analyst Rich Moore offered his opinions on the future of REITs and real estate investment. 

Moore recently left his position as a REIT analyst with RBC Capital Markets. He said that when he started as a REIT analyst in the 1990s, "the terminology and the valuation concepts were certainly not typical." That can put up a barrier to learning about REIT investment for newcomers to the industry, according to Moore.

However, the fundamental concepts behind evaluating REITs as companies don't differ significantly from other industries, according to Moore.

"REITs are as much about growth as any other sector," he said. "Once you get past the different terminology, REITs are no different than any other business."

Moore speculated that the impact of the creation of the new sector for real estate under the Global Industry Classification Standard (GICS) will play out "over the next several years." He indicated that the biggest change resulting from the addition of the sector would be generalist investors studying the full range of REITs, rather than relying on "cursory" reviews of the industry.

Moore also offered his opinions on the characteristics that make for a successful REIT. One is maintaining a healthy balance sheet, the importance of which was demonstrated during the financial crisis, he said. Moore also cited the quality of management teams as crucial to evaluating the strength of REIT.

Regarding the future of the industry, Moore said the maturation of real estate as an asset class will lead to greater separation between strong and weak companies in the industry. He described greater consolidation in the industry as "inevitable." Furthermore, more corporations will likely move real estate off their balance sheets and onto those of REITs, according to Moore.

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