The latest edition of the Nareit REIT Report podcast explores the topic of real estate-targeted technology, commonly known as PropTech, with Blake Liggio, a partner in the law firm Goodwin’s Real Estate Industry Group.
PropTech has seen significant acceleration in recent years due to the growth of technologies targeting real estate and the increase in capital supporting those platforms, according to Liggio.
Liggio said the benefits of PropTech within the real estate industry, namely the ability to increase operational efficiencies and impact overall returns, have become clearer. “This is a relatively new development…real estate was generally resistant to the idea that advancing technology was necessarily a worthwhile effort to explore,” he said.
The latest edition of Nareit’s REIT Report podcast took an inside look at retail real estate with Joe Coradino, CEO of Philadelphia-based PREIT since 2012.
Coradino described 2019 as an “exciting year” for PREIT. “We have so many milestones that we will execute on this year, projects that are coming to fruition that in some cases go back nearly 15 years.”
One noteworthy project is Fashion District Philadelphia, which opens in September. It sits atop the main transportation station in downtown Philadelphia, with about 22 million commuters a year accessing public transportation via the mall’s concourse level.
The latest edition of the Nareit REIT Report podcast featured Gunnar Branson, the CEO of AFIRE, an association for global investors focused on institutional real estate in the United States.
Branson highlighted some of the key findings from AFIRE’s recently-released annual International Investor Survey.
Despite the current length of the real estate cycle and geopolitical and economic concerns, Branson said there’s “a strong sense of confidence in how things look this year. There continues to be a lot of interest from non-U.S. investors in U.S. property markets.”
Richard Stockton, president and CEO of Braemar Hotels & Resorts discussed developments in the luxury hotel segment during the latest edition of the Nareit REIT Report podcast.
Braemar invests primarily in full-service luxury hotels and resorts. Stockton discussed steps Braemar has taken to realign its portfolio, while also commenting on some of the significant weather-related challenges the REIT has faced.
Stockton, meanwhile, touched on the benefits Braemar is accruing through its Enhanced Return Funding Program with external advisor Ashford Inc.
Turning to investment transaction and liquidity in the luxury resort sector, Stockton said major buyers, including other REITs, have moved into the space. “That has put some pressure on pricing…pricing has gotten richer. It’s been a little bit more difficult for us to find deals that make sense financially, so we’re finding ourselves sifting through more deals than we’ve had to do in the past to meet our return criteria.”
Michael Kessler, a partner in the New York REIT practice of Alston & Bird LLP, was a guest on the latest episode of Nareit’s REIT Report podcast.
Kessler discussed the next wave of innovative ideas and concepts that are emerging in the REIT sector.
One area that is generating attention is clean energy and Property Assessed Clean Energy (PACE) loans, Kessler said. These provide incentives and regulatory frameworks to enable private capital, including mREITs, to fund energy efficiency improvements in residential and commercial properties.
Many states have adopted PACE programs or are actively considering them, according to Kessler, adding that estimates point to hundreds of billions of dollars of improvements needing funding over time.
Kessler sees opportunity zones as another area of interest. While not every opportunity zone strategy is right for a REIT, such as a fix-and-flip strategy, “many other strategies could work nicely using a REIT platform and potentially see better valuations.”
In the latest edition of the Nareit REIT Report podcast, Ian Anderson, director of research and analysis at CBRE, spoke about the momentum driving the life science industry and the real estate that it occupies.
A new report from CBRE shows that the industry is growing at its fastest pace in 18 years, with construction of lab space in the top five markets monitored by CBRE doubling over the past year. “The industry is certainly on a tear,” Anderson said. The long-term trajectory doesn’t show anything to derail growth, which continues to attract more investors to the industry.
REITs, meanwhile, play a leading role in that growth. “There’s a lot of capital needed upfront, which scares off some of the smaller investors. That gives REITs an advantage right there,” Anderson said.
In the latest edition of the Nareit REIT Report podcast, Serena Wolfe, a partner at Ernst & Young LLP, discussed the Financial Accounting Standards Board’s lease accounting standard that took effect for publicly traded companies, including REITs, at the beginning of 2019.
The new standard had been under discussion for 10 years or more, and “where we actually ended up is very different from where we began,” Wolfe said. The impact for REITs as lessors is not as significant as originally anticipated, and definitely not as large as for lessees, such as restaurants and retailers, she noted. REITs that are lessees, through a ground lease or a building lease, for example, “could face a large absolute dollar value on the balance sheet.”
REITs, meanwhile, are largely up to date in adopting the new standard, according to Wolfe. She added that the new standard eliminates real-estate-specific lease guidance, meaning that REITs now have to follow guidance for leases of all assets. REITs will have to step back and look at their procedures and controls and figure out how they need to be adapted or changed, which is “particularly important for our public REITs that have internal control reporting,” she said.
In the latest edition of the Nareit REIT Report podcast, Doug Bibby, president of the National Multifamily Housing Council (NMHC), discussed a new initiative aimed at attracting talent into the real estate industry.
The NMHC is part of a collaboration of 29 real estate industry organizations, including Nareit, that are working to highlight the diversity of career paths within the sector. Together they have created Careers Building Communities (CBC), a platform designed for students, educators, and other individuals to explore the industry and learn more about what it takes to obtain education and employment within each sector.
“It’s no secret that the job market is really, really tight right now. Commercial real estate is looking to fill literally millions of jobs,” Bibby said.
The latest edition of the Nareit REIT Report podcast featured Yoel Kranz, a partner in Goodwin’s REIT Capital Markets and M&A/Corporate Governance practices, and Daniel Adams, a partner in the firm’s Business Law Department, where he is co-chair of the Capital Markets group and a member of its REITs and Real Estate M&A practices.
Kranz and Adams spoke on various corporate governance issues, including where the impetus for change in the REIT sector is coming from today.
Kranz pointed out that there is a relatively small group of large institutional investors that have changed the way they approach governance issues. “It used to be that these were very passive investors…that has really changed,” he said. Large institutional investors have taken a very active interest in governance and are making their wishes and interests known to management teams.
“We’re living in a social and political environment today where governance is front and center,” Kranz said. “There really is a focus on good governance and doing the right thing and being good stewards of shareholder capital.”
In the latest edition of the Nareit REIT Report podcast, Jim Sullivan, managing director and REIT analyst at BTIG, discussed the outlook for New York real estate following Amazon’s decision to abandon its plans to locate a second headquarters in Long Island City.
Sullivan said that while the loss of a potential 25,000 jobs will obviously result in less demand, a recent decision by Alexandria Real Estate Equities, Inc. (NYSE: ARE) to purchase property in Long Island City speaks to the area’s growing importance as a home for the life sciences industry. He expects Alexandria to expand its presence there in the coming years. Overall, the Amazon decision is “not a death knell for Long Island City, but clearly a short-term setback.”
Over the last couple of years, New York has become a center of tech job growth—including a significant commitment from Google, as well as from Amazon in Manhattan, according to Sullivan. “Firms up and down the spectrum of tech and social media are expanding aggressively in New York,” with New York-based tech start-ups raising more than $20 billion from venture capital in 2018, he noted.