John Perkins serves as co-head of U.S. real estate investment banking at RBC Capital Markets. After beginning his career as an architect in I. M. Pei & Partners’ New York and Paris offices, Perkins went back to school to learn about the finance side of real estate. Perkins has more than 24 years of real estate investment banking experience, including his time working at J.P. Morgan and Bank of America, and the launch of CBRE’s investment banking business.
What changes have you seen in the sources of capital for public REITs?
The public markets have changed in the past decade. If you look at the amount of public capitalization that is REIT-dedicated, long [position] only investors, it has gone from 40 percent of the market down to about 25 percent. The void has been filled by ETFs, index funds, and other kinds of price takers, who are not making fundamental decisions—they’re just following the market. Retail investors are in the mix, but probably less consequential than they were certainly 10 or 20 years ago in the market.
How has that changed the nature of how liquidity is accessed and the volatility in the market?
With fewer investors who are true fundamental buyers, and now the majority are just buyers at whatever price and weighting they need to track the index, it changes the nature of the market and has made some of the daily moves larger than they might have been. It used to be that most offerings were managed offerings that were points in time when equity investors could get access to significant chunks of shares. Now what’s predominating is the ATM offering, which, if you’re a large investor, makes it very difficult to assemble a meaningful position in a company.
How would you describe the current state of the REIT market?
The REIT market still feels like it’s in reasonably good shape, November and December 2018’s volatility aside. I think there’s been an interesting shift in the way public investors are thinking about where to find opportunity in the various REIT sectors. These days they are much more willing to invest in what had previously been considered niche property sectors. I believe that this shift will continue to be a theme this year. We are likely also in the beginnings of a take-private cycle that really kicked off last year, though it remains to be seen how that plays out. The companies that are cheapest and one would think could be obvious buys in terms of discount to NAVs are in the retail sector where we see limited sponsor interest at the moment. Industrial, data center, and multifamily names are more likely contenders.
You have degrees in architecture, and started your career with I. M. Pei. What lessons from architecture do you carry over to the financing side?
The first part of my career was all about learning how to design and produce the assets, and the second part is about how to finance and think about them strategically as assemblages of assets or operating business. Architecture gives me an affinity for the real estate sector.
I think my background also gives me some perspective on what makes an interesting and profitable asset.
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