APG’s Hogan Says Performance of REITs Exceeding Already High Expectations

Mary Hogan, managing director at APG Asset Management, joined REIT.com for a video interview at REITWorld 2014: NAREIT’s Annual Convention for All Things REIT at the Atlanta Marriott Marquis.

The performance of the entire REIT industry has exceeded her already bullish expectations, Hogan said.

“We were very positive heading into 2014 about the prospects for REIT performance based on relative performance of 2013 and where valuations were then,” Hogan said. “I would not have thought we’d be sitting here in November with REITs up over 20 percent and, importantly, outperforming the broader market to the extent that they have.”

Looking ahead to 2015, Hogan noted that she expects to see interest rates continue to inch higher. She added a caveat about the impact of rate increases, though.

“One thing that I think is important in the way we look at things is that it’s not the absolute level of interest rates that is going to drive how REITs act, it’s really much more of a relative metric,” she said. Instead, the “velocity of change” and level of “unpredictability” in interest rates could have a bigger effect on the REIT market’s performance, according to Hogan.

In terms of the major stories in the REIT market that Hogan will be monitoring next year, she singled out mergers and acquisitions.

“We’ve seen a strong private bid from sovereign wealth funds, other pension funds and private equity firms” for real estate assets in the United States, she said. “In some of the private market transactions that we’ve seen, the pricing really compares very favorably to where REITs are trading.”

Hogan also pointed out that a number of stock exchange-listed REITs have been publicly traded for more than 20 years. Given the rebound in REIT stock prices since the financial crisis, Hogan speculated that some REIT management teams might be looking at M&A as a way to exit the business.

“I fully expect we’ll see more [mergers] next year,” she said.