06/04/2012 | by
Nareit Staff

FASB Discusses Constituent Feedback on Investment Property Entities Proposal
Cohen & Steers Paper on DC Plans Advocates for REITs
REIT.com Video: Brad Case, NAREIT
REITWeek Kicks Off Next Week
REALpac Hosts Retreat on Financial Standards
Investor Outreach Team Picks Up the Pace
Outreach to the Mid-Atlantic Region
Save $200 on Introduction to the REIT Sector Training

June 4, 2012

Message from the President

More than 2,000 REIT executives, investors, analysts and bankers will converge on the New York Hilton next week for REITWeek 2012: NAREIT's Investor Forum.

At REITWeek, our industry tells its story to investors from around the globe who have come to seek investment opportunities in our growing and increasingly diverse REIT marketplace.

The centerpiece of REITWeek is its extensive schedule of individual company presentations. This year, a record number of REIT management teams – more than 110 – will be presenting their own companies' stories to investors. Those stories will be as varied as the companies themselves, whose portfolio holdings cover almost every imaginable segment of the real estate marketplace.

There are, however, two characteristics that all REITs share that anchor our industry's appeal to investors from all walks of life.

They are the time-tested ability to provide dividends and diversification. These two fundamental elements of the REIT investment proposition underlie the message that NAREIT's Investor Outreach staff takes on the road every week.

Indeed, the story of REIT-based real estate investment is compelling, and I look forward to helping tell it next week. I hope to see you there.

Steven A. Wechsler
President and CEO

FASB Discusses Constituent Feedback on Investment Property Entities Proposal

On May 30, NAREIT attended a meeting of the Financial Accounting Standards Board (FASB) where the summary of the feedback it received on its proposed Accounting Standards Update, Real Estate – Investment Property Entities (Topic 973) was discussed. The board received a significant amount of criticism on its Investment Property Entities exposure draft. Given the amount of negative responses, the board is considering whether it should drop the project in its entirety and move the accounting for investment property within the Investment Companies proposal, or develop an asset-based standard for investment property similar to International Accounting Standard No. 40, Investment Property (IAS 40). The FASB staff plan to bring a paper to the board in July, where the board will decide which direction it should take with respect to accounting for investment property.

NAREIT has recommended that the FASB withdraw the Proposed Update and move to develop an asset-based standard that would converge with IAS 40 (incorporating recommended changes to include healthcare and lodging REITs within scope), and achieve consistency with the board's operating principle to avoid issuing complex specialized industry accounting standards.

In a meeting with three FASB members on May 14, NAREIT indicated that in the event that the FASB and the International Accounting Standards Board (IASB) are not prepared to initiate a formal project to consider aligning the accounting and financial reporting for investment property under U.S. GAAP with IAS 40 or a similar asset-based standard with an option to report investment property at either fair value or historical cost, its preference would be that the FASB take no further action with respect to reporting investment property at fair value for U.S. REITs and operating real estate companies. Further, NAREIT expressed its view that the FASB should retain the explicit REIT scope exception contained in the current Investment Companies accounting guidance.

(Contact: Christopher Drula at cdrula@nareit.com)

Cohen & Steers Paper on DC Plans Advocates for REITs

Cohen & Steers published a white paper advocating the use of a real assets strategy for defined contribution (DC) plans, including a substantial allocation to U.S. REITs. The paper, "A DC Plan Approach to Real Assets Diversification," states, "In our view, approximately 80 percent of an inflation-protection portfolio should comprise securities backed by tangible real assets like commodities, natural resource equities and REITs."

The Cohen & Steers analysis states that there is merit for including real assets within target date funds, currently the most widely used investment vehicle in the DC market, to add potential portfolio diversification beyond traditional stocks and bonds. Five distinct investments are used as part of the Cohen & Steers diversified real assets framework: commodities, natural resource equities, REITs, gold and variable rate notes.

According to the paper, "We believe this mix of real asset categories can provide DC plan participants with an effective tool to add asset class diversification, help hedge against the long-term effects of inflation and provide attractive total return potential." The sample allocations provided in the paper include a REIT allocation of 25 percent to 35 percent of the real assets.

Importantly, the Cohen & Steers research validates the approach taken by a number of organizations with which NAREIT has met as part of its Investor Outreach Program and that have recently incorporated real assets components in their DC products. Within the past few years, for example, BlackRock, Charles Schwab Investment Management, PIMCO and Northern Trust have added real assets strategies that include meaningful REIT allocations.

(Contact: Kurt Walten at kwalten@nareit.com)

REIT.com Video: Brad Case, NAREIT

Uncertainty in the broader U.S. economy led to a down month for REITs in May, according to Brad Case, NAREIT's senior vice president of research and industry information.

In a video interview with REIT.com, Case dissected the industry's performance in May. He noted that despite the drop, REITs still outpaced the broader markets for the month. The FTSE NAREIT All REIT Total Return Index fell 3.95 percent in May, while the S&P 500, Dow Jones Industrials, Russell 2000 and NASDAQ all dropped between 6 percent and 7.19 percent for the month. For the year so far, REITs are up roughly 6 percent, also besting the broader markets.

"It was a bad month for investors all around. I would say that what we're looking at is continued uncertainty about the pace and the strength of the expansion," Case said. "It's more a story of uncertainty than of purely bad news."

One bright spot among REITs was the residential mortgage sector. Home financing REITs jumped approximately 2 percent for the month. Investors are responding to "several different signs that the worst of the housing slump is behind us," according to Case.

"This month, we had some good news about housing starts. We had some good news about housing prices," he said. "It's giving investors a little bit more confidence in the returns of home mortgage REITs going forward, and they have a strong dividend yield as well."

Retail REITs were up more than 11 percent through the first five months of May. Case said that could continue through the remainder of the year, although it is highly dependent on the broader economy.

"Consumer spending has held up surprisingly well during the downturn and during the early stages of the recovery," Case said. "If we continue to get signals that the economy is going to expand, maybe not consistent signals from month to month and across all economic indicators, but if there continues to be news that convinces investors that the economic recovery is still on track, then you can expect to continue to see retail spending remain strong and retail REITs produce strong returns."

(Contact: Brad Case at bcase@nareit.com)

REITWeek Kicks Off Next Week

REITWeek 2012: NAREIT's Investor Forum marks the first time this event will be held at the Hilton New York, conveniently located right in the heart of Midtown Manhattan. REITWeek brings the largest concentration of REIT management teams into one central location – more than 110 REITs to date – to present their latest company information to qualified institutional investors. Thousands will gather at this invite-only event to hear REIT management teams provide updates and projections that will help investors identify important company, sector and market trends, evaluate business models, and participate in company Q&A's.

REITWeek also offers a compelling line-up of thought-provoking speakers for the general sessions, including:

Jim Cramer, the dynamic host of CNBC's Mad Money, will speak at the opening luncheon on Tuesday. NAREIT Chair, Don Wood, president and CEO of Federal Realty Investment Trust, will preside.

Kenneth Rogoff, the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University and best-selling author, will speak at the Wednesday luncheon and will touch on global economic issues. Rogoff's book, "This Time is Different: Eight Centuries of Financial Folly," builds on a massive new data set covering 66 countries and 800 years and shows the remarkable quantitative similarities across time and countries in both the run-up to, and the aftermath of, severe financial crises.

Mark Shields, a nationally known columnist and commentator, has worked in Washington, D.C. for more than four decades. He now is a regular panelist on Inside Washington, the weekly public affairs show which is seen on both ABC and PBS. Shields has been called, "A walking almanac of American politics."

If you are an institutional investor and would like to receive an invitation, you may use our online form to request an invitation. If you do not qualify as an institutional investor, but would still like to attend, you may become a sponsor. For more information on sponsoring this event, visit our REITWeek 2012 sponsorship information page.

If you plan to attend, please be sure to register in advance to avoid an on-site registration fee.

Visit the REITWeek website to access registration information, view complete details and full program schedules, or download the REITWeek Mobile App to ensure you have all the details at your fingertips before, during, and after the event.

(Contact: Afia Nyarko at anyarko@nareit.com)

REALpac Hosts Retreat on Financial Standards

NAREIT representatives participated last week in the Real Property Association of Canada's (REALpac) Chief Financial Executives Retreat.

Representing NAREIT were George Yungmann, senior vice president of financial standards, and Christopher Drula, senior director of financial standards. Approximately 60 financial executives of real estate companies located throughout Canada attended the meeting. NAREIT presented the current status of the Financial Accounting Standards Board (FASB) Investment Property Entities exposure draft, the FASB and International Accounting Standards Board (IASB) exposure drafts on Investment Companies/Entities, and the FASB and IASB Leases Project.

(Contact: Christopher Drula at cdrula@nareit.com)

Investor Outreach Team Picks Up the Pace

NAREIT's Investor Outreach team spent much of May visiting with a diverse range of 44 organizations in the institutional investment market controlling more than a combined $8 trillion in assets. The 44 meetings were held with organizations across all targeted investment cohorts, including: 8 with prominent domestic and international pension, retirement and sovereign wealth funds representing more than $131 billion in assets; four with investment consultants with assets under advisement of more than $2 trillion; and 26 with investment managers sponsoring global and domestic investment products for the institutional and retail investor markets and representing close to $6 trillion in assets under management.

A focus for many of the meetings with investment managers continues to be on research NAREIT sponsored with Wilshire Associates on the role of U.S. REITs and global listed real estate securities within target date funds, the most rapidly growing investment products in most 401(k) accounts and other tax-advantaged savings plans. According to the Wilshire analysis, target date funds should include REIT allocations of between five percent and 15 percent. The Wilshire research has generated great interest, particularly among organizations offering asset allocation products, such as target date and target risk funds. Since the beginning of the year, meetings have been held with managers that in combination control more than 85 percent of the assets in the target date market.

Through the end of May, NAREIT conducted 190 meetings with many of the largest and most influential investment organizations within the institutional investment marketplace. Collectively, these entities represent over $29 trillion in assets under management or advisement.

(Contact: Kurt Walten at kwalten@nareit.com)

Outreach to the Mid-Atlantic Region

In conjunction with our efforts to increase the level of investment in REITs by public sector pension plans, NAREIT has expanded its conference agenda to include membership and participation in a number of national and state associations representing the interests of public sector pension and retirement plans.

On May 23, Meredith Despins, NAREIT's vice president for investment affairs and investor education, delivered a presentation to delegates attending the Pennsylvania Association of Public Employee Retirement Systems (PAPERS) 8th Annual Spring Forum, in Harrisburg, PA. The theme of this year's forum was "Protecting Public Employee Benefits: What Lies Beneath?" Despins spoke on the topic of "Optimizing Risk and Return in Pension Fund Real Estate: REITs & Private Equity Real Estate," highlighting the role REITs can help play in rebuilding portfolio value, delivering income, and as a risk management tool when combined with private equity real estate investments in the construction of a real estate investment program.

Following the PAPERS forum, Despins was joined by Fraser Hughes, research director at the European Public Real Estate Association (EPRA), for a series of joint outreach meetings with major investment organizations in Pennsylvania and New Jersey. The two met with a diverse group of organizations representing nearly $150 billion in total assets, including several prominent state and municipal employee pension and retirement systems, investment management firms, and an institutional investment consultant.

These meetings provide an opportunity not only to further the ongoing partnership between NAREIT and EPRA, but importantly, to leverage the research and industry perspectives of both organizations and provide a global view on the real estate investment proposition made available by REITs and listed real estate securities worldwide.

(Contact: Meredith Despins at mdespins@nareit.com)

Save $200 on Introduction to the REIT Sector Training

REITs, banks, and advisory firms have been sending their professionals to SNL REIT School™ for more than a decade to get a comprehensive introduction to the REIT sector. The next session will be held June 26-27 at the Wyndham Chicago Hotel.

The agenda includes: sources of financial data necessary for evaluating a REIT's health and risk-return profile; REIT credit analysis; strategies for accessing and managing capital; evaluating acquisitions and dispositions; methodologies for valuing companies and structuring deals, and more. The event is suitable for both financial and non-financial professionals. NAREIT members save $200 by entering code NAREIT200.

(Contact: Jeff Henriksen at jhenriksen@nareit.com)

NewsBrief Will Not Publish Next Week

NewsBrief will not publish Monday, June 11 due to the start of REITWeek 2012: NAREIT's Investor Forum. The next issue of NewsBrief will publish Monday, June 18, and will include a recap of REITWeek.

(Contact: Matt Bechard at mbechard@nareit.com)