REITs are likely to attract growing interest from private real estate funds looking to deploy capital where they see value discrepancies, says Christian Busken, senior vice president and director of real assets at FEG Investment Advisors.
“There's a growing recognition that REITs present some attractive opportunities and I think that we'll see more private firms getting into the space,” Busken told the REIT Report podcast. He noted that “it's not unusual for us to see some of our private real estate funds selectively take positions in REITs where they see some kind of a value discrepancy.”
Busken added that with $300 billion-plus of private real estate dry powder on the sidelines and needing to be deployed, “we could definitely see more private funds playing in the market.”
During the podcast, Busken also discussed how FEG structures real estate portfolios for its clients and how REITs fit in. “REITs provide a liquid exposure to a broad range of property types,” he said. Busken also talked about evolution in the REIT universe and potential new property types, such as boat marinas.
Meanwhile, Busken discussed how FEG screens potential investment managers and some of the attributes of successful relationships the firm has already forged.
“We look at several factors when evaluating managers and I'd say first of all that performance is obviously important, but it's usually not the first thing. We place a lot of emphasis on teams and organization and stability and the depth of the team that's managing portfolios. We want to see a high level of conviction,” Busken said.
FEG is an institutional investment consulting firm founded in 1988. As of December 31, 2022, over 70% of its clients are nonprofits—primarily endowments, foundations, and healthcare organizations. FEG advises on about $70 billion in assets and manages about $11 billion in discretionary capital.