07/12/2017 | by
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PGIM Portfolio Manager Still Has an Eye on Interest Rates

Rick Romano, managing director and portfolio manager with PGIM Real Estate, joined REIT.com for a video interview at REITWeek 2017: NAREIT’s Investor Forum at the New York Hilton Midtown.

The outlook for interest rates remains one of the biggest stories in the REIT market, according to Romano. Rates are still at lower levels than investors expected at the beginning of 2017, Romano said. He noted that with the future of policy initiatives such as infrastructure spending and tax reform looking murky, investors have revised their expectations on growth rates downward, which has changed their view on monetary policy.

Romano also noted that the environment in 2017 is better suited to active investment managers.

“Last year, you had a situation where yield mattered, and that was the only thing that mattered,” he said.

Regarding key developments in the international markets, Romano highlighted valuations of Japanese developers: “When you look at their price versus real estate value, it’s probably… towards the low end of where it has been in history.” There are also attractive real estate investment opportunities in Europe, according to Romano, particularly in Ireland and Sweden.

In terms of looking ahead to the next six months, Romano encouraged investors to track policy developments in the United States and to continue to monitor interest rates.