Jay Leupp, portfolio manager with Lazard Asset Management, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.
Leupp is a veteran in international commercial real estate investment. He discussed the evolution of the commercial real estate markets around the globe throughout the course of his 25-year career.
“We’ve seen tremendous development, both in the U.S. and internationally, when it comes to the public issuance and trading of real estate securities,” Leupp said. “When I began as an equity analyst in the business 20 years ago, the equity market capitalization of the U.S. REIT space was $30 billion. Today, it’s $600 billion, so it has been a 20-fold increase in the United States. We’ve seen similar growth internationally as well. With the proliferation and adoption of the REIT internationally, we’ve seen the international markets become more and more liquid. The first companies to access the real estate markets via the public equity markets were the European companies, and then that spread to Hong Kong and greater Asia. We’ve seen more growth near term in the U.S., because our markets have grown more rapidly, but we see growth internationally as well, and we see that growth continuing.”
Leupp discussed valuations of U.S. REIT stock shares in light of the recent market correction.
“We’re actually seeing some real attractive values, both on an absolute basis—that is, share prices relative to underlying real estate—as well as some good relative values,” he said. “There is some fear of rising interest rates. That has put some sell pressure on the shares near term. We’re trying to take advantage of that and are buying some of the better-positioned companies going forward.”
Leupp noted that he is keeping his eye on a “multi-part story” in the second half of 2013.
“I think it’s very much going to be a macro story,” he said. “I think the combination of interest rates and the economic outlook, both in the U.S. and internationally, will directly affect commercial real estate and real estate capital markets, so we’ll be watching both.”