Cedrik Lachance, director of U.S. REIT research at Green Street Advisors, joined REIT.com for a video interview at REITWise 2017: NAREIT’s Law, Accounting & Finance Conference in La Quinta, California.
Lachance discussed the overall direction of real estate values. He explained that Green Street compares private market real estate values with two different indicators. The first indicator looks at total real estate returns in comparison with corporate bonds, he said.
“When we make that comparison, we say that real estate is a little bit on the cheap side,” Lachance said.
Green Street also compares private market values against REIT prices.
“From that standpoint, REITs trade at a discount to net asset value (NAV). While the public market isn’t always right, directionally, it’s an interesting indicator,” Lachance said.
Blending the two indicators suggests that private real estate market values are probably going to be about flat for the next six to 12 months, according to Lachance.
Meanwhile, Lachance said there are four segments of the REIT market that are attractively priced at this this time: manufactured homes, storage, apartments and malls.
“The mall business clearly is in a period where it has to reinvent itself,” Lachance said. He noted that the mall business is represented in the public market by class-A malls, which are likely to have the strongest performance in the long term.