With more than 15 years of experience in capital raising, marketing, and product management with real estate firms—including CBRE Investment Management, Barings, Schroders, and Bank of America—David Sullivan has joined Nareit as senior vice president, investment affairs. Sullivan will direct Nareit’s investor outreach to pension plans, endowments, and foundations.
In your view, how can REITs be beneficial to defined benefit plans?
Defined benefit plans generally use real estate as part of their strategic asset allocation and are increasingly using REITs as a component of “completion strategies,” whereby investors can tailor exposure to REIT sectors to complement their existing real estate investments. This approach can help broaden allocations to reflect a fuller representation of the investable real estate universe.
Defined benefit plans are often concentrated in the “core four” real estate sectors—retail, office, industrial, apartments—and missing much of the real estate that houses the modern economy, including health care, self-storage, data centers, cell towers, and logistics. REITs can coexist with and complement private real estate by offering tangible benefits of portfolio customization to fit within an investor’s broader real estate allocation.
How will your private real estate background benefit you in your current role?
I understand the private equity real estate world. I’ve spent nearly two decades marketing private real estate funds to institutional investors and developing relationships with North American real estate investment officers. This insight has helped me better position REITs as a complement, not competitor, to private real estate. I am familiar with institutional investment processes and can help introduce REITs into the mix so that these fiduciary investors can help their employees retire comfortably.
What are some of the best ways to promote REIT investing to defined benefit plans?
My role is focused on promoting institutional pension investment into REITs, and that is best accomplished by meeting directly with plan sponsors, their consultants, and trustees. It can be a long process as these organizations are large and process-driven. Every month my Nareit colleagues and I are on the road meeting with investment officers and consultants to help illuminate how including REITs can help increase their plan’s risk-adjusted returns. It’s a team effort.
What are the obstacles you need to overcome in this mission?
Many of the North American defined benefit plans have been investing in real estate for decades, largely focused on private equity real estate funds. Sometimes REITs are a part of the real estate allocation; other times they are under the purview of the equity team. The challenge is to introduce the potential benefits of including REIT investments alongside private portfolios. This is where completion strategies can play an effective role; and my Nareit colleagues and I must communicate the important role REITs play in relatively new and fast-growing segments of real estate, including logistics and cell towers