11/30/2015 | By Sarah Borchersen-Keto
David Neithercut, president and CEO of Equity Residential (NYSE: EQR), joined REIT.com for a CEO Spotlight video interview at REITWorld 2015: NAREIT’s Annual Convention for All Things REIT at the Wynn Las Vegas.
Neithercut, who served as NAREIT’s 2015 Chair, reflected on the main challenges and opportunities for the industry going into 2016.
“The opportunities center around how large the industry has grown and the recognition we’re now getting,” Neithercut said. He described the elevation of real estate to an 11th headline sector of the Global Industry Classification Standard (GICS) as “a great thing for the industry,” and noted that 90 percent of the listed securities in that segment will be Equity REITs.
“It’s a great time to be a REIT and a great time to be in the public real estate space,” he said.
In terms of challenges, Neithercut pointed to the need to continue to attract additional capital and make more investors aware of the benefits of investing in public real estate through REITs.
Turning to Equity Residential specifically, Neithercut discussed the company’s recent decision to sell more than 23,000 apartment units in mainly suburban locations to private equity firm Starwood Capital Group for $5.4 billion.
Neithercut explained that Equity Residential has slowly been exiting more secondary, commodity-like markets and focusing on high-barrier coastal markets. The company has already sold off assets in Texas, as well as in Atlanta and Phoenix.
As for redeploying the proceeds from the sale, Neithercut highlighted the difficulties in finding good acquisition opportunities in its core markets because prices are “fairly rich” and yields are down. In response, the company decided to opt for a special dividend to shareholders of between $9 and $11, Neithercut said. Feedback on the decision has been “nothing but positive,” he added.
The company will also take a more cautious approach toward development in 2016 and 2017, Neithercut said, as land prices and construction costs are higher and development yields are down.