Real Estate Fund Manager Readying for Rising Interest Rates
07/10/2014 | by Sarah Borchersen-Keto


Matt Werner, portfolio manager at Chilton Capital Management, joined for a video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.

 In January, Chilton launched the Chilton Realty Income & Growth Fund, which invests in equity REITs and other real estate-related entities. Werner said the fund operates a “top-down process” that considers geographic regions, property types, fundamentals and demographic trends. The information is then entered into Chilton’s proprietary earnings models, which then builds a target price, Werner explained.

“We believe commercial real estate is a long-term asset, and so we position the fund for a period of rising interest rates that we think will happen at some point in the future,” Werner said. Sectors that are more negatively impacted by rising interest rates, such as health care, are underweighted in the fund. Sectors that perform better, including self-storage, are overweighted, Werner said.

Werner, who has served as a judge for NAREIT Investor CARE Awards for multiple years, also commented on some of the biggest changes he has seen in how REITs are communicating with their investors. The biggest change, according to Werner, has been the decline in the number of companies issuing annual letters to shareholders, which has been replaced by the supplemental quarterly earnings report. Werner said the supplemental earnings report has become “much more robust,” while REITs are putting more money into their websites to improve transparency.

In addition, investor relations staffs “are much more knowledgeable and can sometimes be a very good go-to person instead of having to go to the CFO,” Werner added.

Werner also discussed sustainability and whether REITs and their investors have fully embraced the concept. REITs “are on the forefront” of green building and management, according to Werner.

However, Werner said investors as a whole don’t pay enough attention to companies’ sustainability efforts.