Current volatility within the REIT market is creating the potential for opportunistic investment, particularly among well-capitalized companies with seasoned management teams, said Jay Olander, managing partner of Cornerstone Realty Advisors.
Olander has served in senior REIT management positions for over 25 years. Most recently, he oversaw the $1.9 billion sale in 2016 of Landmark Apartment Trust, Inc., an apartment REIT.
Speaking on the REIT Report, Olander compared current market conditions to those of previous cycles, concluding that “over time, we do expect that the investment market will return, just as we’ve seen in the past.”
In uncertain times the market can become very inefficient and irrational, Olander said. “We believe there are great opportunities to invest in the REIT market at this time because of this market inefficiency.”
To that end, Cornerstone has teamed up with Capital Square to launch the REIT Recovery Fund. Olander said the fund will invest in undervalued companies, patiently wait for market normalcy, and then return capital to investors. He stressed that net asset value will be a key consideration in any investment decisions the fund makes.
Olander also said capital is likely to return to the market “once we have a long term view of how we’ll live with this pandemic and REIT prices will return to pre-COVID pricing, with upside potential.”
Phase one of the fund’s investment strategy will be more focused on residential assets. “We believe these companies will bounce back quickly,” Olander said. As the fund moves through the investment cycle, other asset classes with a longer recovery time will be considered, such as lodging, office, and possibly retail, he said.
The fund will also target seasoned management teams across all sectors, Olander said. “Their expertise will really show in the recovery value of their companies over time,” he added.
Meanwhile, Olander commented on the 60th anniversary of the REIT industry this year.
“The ability to offer a wide range of real estate investment opportunities to a broad range of investors, both retail and institutional, through this REIT structure has been the key to success in the industry,” he said.
“Well-capitalized companies with management teams that have the ability to recognize and adapt to change are the ones that are going to thrive over time. This is a basic fundamental of well-run companies and these are the ones that we’re interested in investing in,” Olander added.