Jon Bortz, chairman, president, and CEO of Pebblebrook Hotel Trust, was a guest on the latest edition of Nareit’s REIT Report podcast.
Early in September, Pebblebrook announced it would pay $5.2 billion to acquire fellow hotel REIT LaSalle Hotel Properties, ending a series of revised offers that began in March. The deal is expected to close later this year.
Bortz, who founded both REITs, said the two companies share an “incredible similarity” in terms of assets, quality, markets, geography, and brands.
Pebblebrook has said it plans to sell between $500 million and $1 billion of assets from the combined portfolio. The bulk of sales are likely to come from the LaSalle side and from the East Coast, Bortz said. “The sales will allow us to finetune the portfolio from a size and diversification perspective,” he noted.
Looking ahead, Bortz said a number of opportunities exist within the LaSalle portfolio.
Sara Neff, Kilroy Realty Corp.’s senior vice president for sustainability, was a guest on the latest edition of Nareit’s REIT Report podcast.
Kilroy was recently named a global sector leader in the 2018 GRESB Real Estate Assessment.
The West Coast office REIT has set a goal to achieve carbon neutral operations by the end of 2020. Neff noted that although buildings generate 40 percent of carbon emissions, they are still largely overlooked by both the real estate and the larger environmental community. Kilroy is attempting to change that and has already put agreements in place to reach the 2020 deadline, Neff said. “We are going to deliver.”
Brad Case, Nareit senior vice president for research and industry information, was a guest on the latest episode of Nareit’s REIT Report podcast and discussed the impact of emerging blockchain technology on the real estate industry.
Developed in connection with cryptocurrencies, blockchain is “essentially a set of practices that make it possible to keep records of who owns assets,” Case explaied. He noted that although blockchain is not the same as distributed ledger, for the purposes of considering the effect on real estate, the two terms can be treated as synonyms.
Blockchain can establish ownership of an asset much more efficiently than at present, Case said. In addition, the technology makes it possible for governments to keep property records used for tax purposes at a reduced cost and lower probability of fraud.
Conditions across the entire hotel industry are “very healthy,” said Ashford Inc. (NYSE American: AINC) Co-President and Chief Strategy Officer Rob Hays, who was a guest on the latest edition of Nareit’s REIT Report podcast.
Ashford advises two REITs, Ashford Hospitality Trust, Inc., which focuses on the full-service segment, and Braemar Hotels & Resorts, which concentrates more on the luxury sector.
Supply growth is holding firm at around two percent, while demand is staying ahead of that, Hays said. The industry has also seen some occupancy gains, combined with inflationary-type room rate increases, he added.
Jacques Gordon, global head of research and strategy at LaSalle Investment Management, was a recent guest on the Nareit REIT Report podcast.
Gordon will be speaking on the economic outlook for real estate at Nareit’s SFO Forum 2018 on Sept. 24.
In terms of the real estate cycle, “we’re in a good place,” Gordon said.
“Fundamentals are healthy. There’s a lot of new supply but there’s also a lot of demand. Rent growth is steadily upward,” Gordon noted. “There’s a lot of good news already registered in 2018 and we expect steady as she goes, positive for the rest of the year,” he added.
In the latest edition of Nareit’s REIT Report podcast, Leslie Cook, ENERGY STAR program manager at the Environmental Protection Agency (EPA), discusses upcoming revisions to ENERGY STAR score calculations and steps that REITs can take to prepare for the changes.
ENERGY STAR’s online tool, ENERGY STAR Portfolio Manager, is used to measure and track the energy performance of commercial buildings across the nation. For eligible buildings, the tool calculates a one to 100 ENERGY STAR score for rating a facility’s energy performance.
Cook notes that the calculations for current ENERGY STAR performance metrics are based on 2003 data. Models are now being updated to reflect the 2012 Commercial Buildings Energy Consumption Survey (CBECS) from the Department of Energy. The updates will be released on August 27.
Scott Crowe, chief investment strategist at CenterSquare Investment Management, was a guest on the latest edition of Nareit’s REIT Report podcast.
CenterSquare recently published a report, “The REIT vs. FAANG Valuation Showdown.” It notes that the current valuation of FAANG (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google) stocks roughly equate to $3 trillion of total equity value, versus $5.8 trillion for the entire U.S. institutional real estate market.
“Essentially the choice that the market is giving investors today is, would you rather own the five most popular tech stocks in America, or half of all the commercial real estate in this country?” Crowe said. While FAANG stocks are interesting and dynamic, the largest tech companies of today may not be at the top a decade from now. Real estate, however, is still going to be around to house the companies of the future, he noted.
Allan Swaringen, president & CEO of JLL Income Property Trust, was a guest on the latest edition of the Nareit REIT Report podcast.
JLL Income Property Trust is a perpetual life, daily NAV REIT that is advised by LaSalle Investment Management and sponsored by JLL.
Swaringen described the landscape of the non-listed REIT sector today. He pointed to three substantive changes that have occurred in the last five to six years. They include: a move to perpetual offerings; increased regulation and the adoption of an institutional valuation methodology; and a movement toward programs diversified by property type.
SBA Communications is a wireless infrastructure REIT active in North, Central, and South American markets. The company has been in operation for nearly 30 years. Today it owns and operates close to 30,000 towers across the Western Hemisphere—from the upper reaches of Canada to the tips of Argentina and Chile.
Jeffrey Stoops, president and CEO, described the domestic leasing environment as “probably as good as it’s been in the last four or five years.” All four major wireless carriers are busy pursuing projects and enhancements that ultimately will advance their transition to 5G technology, he said. SBA benefits in terms of new leases and tenancies on towers where carriers may not have been before.
Brad Case, Nareit senior vice president for research and industry information, was a guest on the latest edition of Nareit’s REIT report podcast.
Case highlighted the turnaround in REIT market performance seen since February. Prior to that, REITs had underperformed the broader stock market – particularly growth stocks - for about a year and a half.