REIT Feed

Equity Commonwealth Agrees to Buy Monmouth Real Estate Investment in $3.4 Billion Deal

6 days 10 hours ago
Equity Commonwealth Agrees to Buy Monmouth Real Estate Investment in $3.4 Billion Deal Sarah Borchers… May. 5 2021 Teaser

Equity Commonwealth plans to shed office assets; Sam Zell says still “significant” growth in industrial.

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Equity Commonwealth (NYSE: EQC) will acquire Monmouth Real Estate Investment Corp. (NYSE: MNR) in an all-stock transaction valued at approximately $3.4 billion, including debt, the two companies said May 5.

Once the acquisition closes, Equity Commonwealth is expected to have approximately $2.5 billion of pro forma cash on its balance sheet. The company plans to dispose of its four office properties and Monmouth’s portfolio of marketable securities over time and reinvest the proceeds in future acquisitions.

Equity Commonwealth President and CEO David Helfand said Monmouth provides “an attractive and scalable platform” that the company can grow, given its significant cash and balance sheet capacity.

Sam Zell, chairman of Equity Commonwealth, said the transaction provides Equity Commonwealth with a high-quality, net-leased industrial business with stable cash flows while preserving the REIT’s balance sheet capacity for future acquisitions.

During a conference call, Zell acknowledged that the industrial space is “very crowded at the moment,” but added that not many players have $5 billion of buying capability and cash on the balance sheet. “It’s going to be up to us to take advantage of that set of circumstances,” he said.

Zell denied a suggestion that Equity Commonwealth was late in entering the industrial sector, which he said, “still has a very significant amount of room yet to grow.” As for the office sector, Zell noted that the market was oversupplied even before the pandemic. “Oversupply is going to impact that sector very significantly over the next few years.”

Helfand noted during the call that the office properties are not currently being marketed and that the company will “look for opportunities when it makes sense.”

Meanwhile, Michael Landy, president and CEO of Monmouth, said that following a strategic alternatives process, the board unanimously determined that the merger was the best outcome to maximize value for Monmouth stockholders.

The transaction states that Monmouth shareholders will receive 0.67 shares of Equity Commonwealth for each share they own. Based on the closing price for Equity Commonwealth on May 4, this represents approximately $19.40 per Monmouth share, versus the May 4 closing price of $18.55.

The combined company is expected to have a pro forma equity market capitalization of approximately $5.5 billion.

Article Author(s) Sarah Borchersen-Keto Featured Image Companies Equity Commonwealth Monmouth Real Estate Investment Corporation
Sarah Borchersen-Keto

Realty Income, VEREIT Agree to Merge; Office Assets to be Spun-Off

1 week 5 days ago
Realty Income, VEREIT Agree to Merge; Office Assets to be Spun-Off Sarah Borchers… Apr. 29 2021 Teaser

Combined net lease REIT will have enterprise value of approximately $50 billion.

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Realty Income Corp . (NYSE: O) said April 29 that it has agreed to acquire VEREIT, Inc. (NYSE: VER) in an all-stock transaction, creating a combined company with an enterprise value of approximately $50 billion.

In addition, the two REITs plan to spin-off 97 office properties into a new, self-managed, publicly traded REIT (SpinCo), saying that office real estate does not play a role in the company’s long-term acquisition strategy.

Under the terms of the agreement, VEREIT shareholders will receive 0.705 shares of Realty Income stock for every share of VEREIT stock, representing a 17% premium to the previous day’s closing price.

Following the merger and the spin-off, Realty Income will continue as the surviving public entity. Realty Income and former VEREIT shareholders are expected to own approximately 70% and 30%, respectively, of both Realty Income and SpinCo.

During a conference call, Realty Income President and CEO Sumit Roy said the merger would be immediately accretive to adjusted funds from operations (AFFO) and would provide value creation for Realty Income's shareholders—while enhancing the REIT’s ability to execute on its ambitious growth initiatives.

As a combined entity, the merged company will benefit from increased size, scale, and diversification, continuing to distance itself as the leader in the net lease industry, Roy said. He noted that VEREIT's real estate portfolio is “highly complementary,” which is expected to further enhance the consistency and durability of cash flows.

Glenn Rufrano, CEO of VEREIT, said the merger recognizes the value created in VEREIT, which had been the objective of the management team since 2015. "We put an excellent team in place, enhanced the portfolio, created an investment-grade balance sheet, and resolved all legacy issues,” he said.

Meanwhile, Roy described the net lease market as “incredibly fragmented.” While acknowledging the company’s global goals, he noted that “we have to walk before we can run.” Realty Income's growth strategy is expected to remain focused primarily on high-quality, single-tenant net lease retail and industrial properties in the U.S. and U.K., leased to clients that are leaders in their respective businesses.

Article Author(s) Sarah Borchersen-Keto Featured Image Companies Realty Income Corporation VEREIT, Inc.
Sarah Borchersen-Keto

Industry Experts Publish First Academically-Focused Textbook on REIT Investment

2 weeks 4 days ago
Industry Experts Publish First Academically-Focused Textbook on REIT Investment Sarah Borchers… Apr. 23 2021 Teaser

Stephanie Krewson-Kelly and Glenn Mueller are co-authors of Educated REIT Investing

 

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The authors of a new book on REITs and real estate investment, Educated REIT Investing, say it is the first of its kind to target academic institutions, while still being concise enough to attract a general audience.

The book is co-authored by Stephanie Krewson-Kelly, vice president of investor relations at Corporate Office Properties Trust (NYSE: OFC), and Glenn Mueller, a professor at the University of Denver’s Franklin L. Burns School of Real Estate and Construction Management, and a real estate investment strategist at Black Creek Group.

The book updates Krewson-Kelly’s 2016 book, The Intelligent REIT Investor, and includes new chapters by Mueller. Nareit Senior Economist Calvin Schnure and Merrie Frankel, president of Minerva Realty Consultants, also contributed to the book.

Krewson-Kelly pointed to two main reasons to update the 2016 book: The 2017 Tax Cuts and Jobs Act changed the way that REIT dividends are taxed at the investor level, she said, and in 2018, Nareit tweaked its definition of funds from operations (FFO).

Since most of the 2016 sales came from educational institutions, it was decided to create the first textbook on REITs, Krewson-Kelly explained. She described it as “the only comprehensive book on how to analyze and invest in REITs.” Mueller added that the book includes presentations for each chapter, along with exams and case studies.

Article Author(s) Sarah Borchersen-Keto Featured Image Companies Corporate Office Properties Trust Podcast embed link https://podomatic.com/embed/html5/episode/10016869?autoplay=false
Sarah Borchersen-Keto

Safehold CEO Says Strong Rent Coverage, New Credit Ratings Position REIT for Growth

3 weeks 4 days ago
Safehold CEO Says Strong Rent Coverage, New Credit Ratings Position REIT for Growth Sarah Borchers… Apr. 16 2021 Teaser

Jay Sugarman says ground lease market could eventually grow to around $1 trillion.

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With 100% of its ground lease rents paid in 2020 and newly-received investment grade credit ratings, Safehold Inc. (NYSE: SAFE) Chairman and CEO Jay Sugarman says the REIT is “really well positioned to keep growing.”

Speaking on the REIT Report, Sugarman noted that despite the challenges of 2020, “last year actually proved how strong the business is.” Meanwhile, new ratings from Moody’s Investors Services and Fitch Ratings “will be a pretty major competitive advantage,” he added.

Sugarman noted that when it comes to selecting particular property types, “our mission is to go where the best markets and land is.” Multifamily has been a “great story so far,” and represents about 25% of the portfolio, he said. “I imagine we’ll be in all property types in the top 30 markets in the next year or so.”

Meanwhile, Sugarman said he believes the modern ground lease structure “can do for commercial real estate what net lease did for the corporate world, and that’s about a $1 trillion industry.”

“We think there are big things ahead as more and more people understand that modern ground leases are just a more efficient, lower cost solution, and very similar to what corporations have been doing with net leases for decades…there’s no reason this can’t become a $1 trillion industry as well,” Sugarman said.

As for new entrants in the market, Sugarman said he welcomes the interest: “We want this to be a mainstream product so the more people who are out there educating the market the better.”

Article Author(s) Sarah Borchersen-Keto Featured Image Companies Safehold Inc. Podcast embed link https://podomatic.com/embed/html5/episode/10011188?autoplay=false
Sarah Borchersen-Keto

Kimco and Weingarten Realty to Merge, Creating $12 Billion Market Cap REIT

3 weeks 5 days ago
Kimco and Weingarten Realty to Merge, Creating $12 Billion Market Cap REIT Sarah Borchers… Apr. 15 2021 Teaser

Merger underscores conviction in open-air shopping center segment.

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Kimco Realty Corp . (NYSE: KIM) said April 15 it will merge with Weingarten Realty Investors (NYSE: WRI) in an approximately $3.9 billion cash and stock deal, creating a major player in the open-air shopping center segment that has held up well during the pandemic.

The merger will create a national operating portfolio of 559 open-air grocery-anchored shopping centers and mixed-use assets, with properties mainly concentrated in the top major metro markets.

The combined company is expected to have a pro forma equity market capitalization of approximately $12 billion and a pro forma total enterprise value of approximately $20.5 billion.

Under the agreement, each Weingarten common share will be converted into 1.408 newly issued Kimco common stock, plus $2.89 in cash. Based on the closing stock price for Kimco on April 14, this represents a total value of approximately $30.32 per Weingarten share. Kimco shareholders are expected to own approximately 71% of the combined company’s equity, with Weingarten shareholders owning approximately 29%.

“This business combination is highly strategic, creating a stronger platform that is even more capable of delivering long-term growth and value creation,” said Conor Flynn, Kimco CEO.

Flynn said the transaction, which is expected to be completed in the second half of this year, reflects a strong conviction in grocery-anchored shopping centers. The category, he said, has performed well throughout the pandemic and provides last-mile locations that are “more valuable than ever due to their hybrid role as both shopping destinations and omnichannel fulfillment epicenters.”

The combined company is expected to benefit from increased scale and density in key Sun Belt markets, enhanced asset quality, tenant diversity, a larger redevelopment pipeline, and a deleveraged balance sheet.

Drew Alexander, chairman, president, and CEO of Weingarten, said the combined company’s increased size and scale, together with its financial strength, “should drive an advantageous cost of capital, allowing the combined company to more readily pursue value creation opportunities.”

Meanwhile, Haendel St. Juste, managing director and senior REITs analyst at Mizuho Securities, described the deal pricing as a “good read-through for the sector…it gives clarity on asset values.”

At the same time, St. Juste does not see the deal as necessarily providing an impetus for further M&A activity. Institutional capital had been buying shopping center assets before the pandemic, he said, but has since pulled back. “There’s some post-COVID euphoria…but there’s also a reality that it’s still a pretty challenged business and do you want to be buying portfolios?”

Article Author(s) Sarah Borchersen-Keto Featured Image Companies Kimco Realty Corporation Weingarten Realty Investors
Sarah Borchersen-Keto

REITs Named as EPA 2021 ENERGY STAR Award Winners

3 weeks 5 days ago
REITs Named as EPA 2021 ENERGY STAR Award Winners Sarah Borchers… Apr. 15 2021 Teaser

Seven REITs received the ENERGY STAR sustained excellence award, the highest honor.

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Thirteen REITs have been named as 2021 Environmental Protection Agency (EPA) ENERGY STAR Partner of the Year Award winners, with seven of the 13 receiving a Sustained Excellence Award—the highest honor among ENERGY STAR Awards.

Each year, EPA honors a group of businesses and organizations that have made outstanding contributions to protecting the environment through superior energy efficiency achievements.

EPA presents the Sustained Excellence Award to businesses or organizations that have already received ENERGY STAR Partner of the Year recognition for a minimum of two consecutive years and have gone above and beyond the criteria needed to qualify for recognition.

REITs that received the Sustained Excellence Award include:

Kilroy Realty Corp . (NYSE: KRC), its sixth consecutive Sustained Excellence win

Vornado Realty Trust (NYSE: VNO), its sixth consecutive Sustained Excellence win

SL Green Realty Corp . (NYSE: SLG), its fourth consecutive Sustained Excellence win

Office Properties Income Trust (Nasdaq: OPI), its second consecutive Sustained Excellence win

Boston Properties, Inc . (NYSE: BXP), its first Sustained Excellence win

Hudson Pacific Properties, Inc . (NYSE: HPP), its first Sustained Excellence win

Welltower Inc . (NYSE: WELL), its first Sustained Excellence win

In addition, The RMR Group LLC, which manages all properties owned by Office Properties Income Trust, had its first Sustained Excellence win.

REITs that were named as a Partner of the Year award winner include:

Columbia Property Trust, Inc, (NYSE: CXP); Digital Realty Trust, Inc. (NYSE: DLR); Empire State Realty Trust, Inc. (NYSE: ESRT); Physicians Realty Trust (NYSE: DOC); Piedmont Office Realty Trust, Inc. (NYSE: PDM); and, Ventas, Inc. (NYSE: VTR).

Article Author(s) Sarah Borchersen-Keto Featured Image Companies Kilroy Realty Corporation Vornado Realty Trust SL Green Realty Corp. Office Properties Income Trust Boston Properties, Inc. Hudson Pacific Properties, Inc. Welltower Inc. Columbia Property Trust Inc. Digital Realty Empire State Realty Trust Physicians Realty Trust Piedmont Office Realty Trust, Inc. Ventas, Inc.
Sarah Borchersen-Keto

REITs Seen Benefitting from Economic Recovery, Unleashing of Pent-Up Demand

1 month ago
REITs Seen Benefitting from Economic Recovery, Unleashing of Pent-Up Demand Sarah Borchers… Apr. 8 2021 Teaser

NYU Schack REIT Symposium featured leading REIT CEOs across a range of sectors.

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The REIT sector has remained resilient throughout the pandemic and is ready to take advantage of the recovering economy and unleashing of pent-up demand that is expected to characterize the rest of 2021 and beyond, according to the NYU Schack Institute of Real Estate’s 25th Annual REIT Symposium: REIT Leadership in a Post-Pandemic World.

Adam Emmerich, partner at Wachtell, Lipton, Rosen & Katz, opened the symposium by making several predictions, including: work from home, or some version thereof, is here to stay; ESG is at an inflection point; 2021 will be the year of the “REIT mega deal”; and, the REIT universe will continue to expand.

In a panel titled The Bull Case for REITS Post-Covid, and How to Play It, Mike Kirby, co-founder and director of research at Green Street, argued that there is indeed a strong bull case for the industry at this time. “REITs have not looked this cheap in 15 years,” he said.

Kirby said it does appear that the stock market overreacted during the course of the pandemic. The recovery in REIT share prices “has been for the right reasons,” he said, given the “very favorable” economic news.

During a keynote lunch session, Prologis, Inc. (NYSE: PLD) chairman and CEO Hamid Moghadam, noted that a key development to come out of the pandemic is the realization that supply chains have been “so stretched and fine-tuned for efficiency that they have no resiliency.” The trend of declining inventories has “turned a corner,” he added.

And while the pandemic has accelerated the penetration of e-commerce, Moghadam said he expects there might be some leveling off of that penetration once the economy fully reopens. However, e-commerce will keep growing off of a higher base, he added.

During a fireside chat, Debra Cafaro, chairman and CEO of Ventas, Inc. (NYSE: VTR), said the broader economy is poised for a “break-out to the upside.” While the economy will benefit from increased infrastructure spending and pent-up consumer demand, corporate activity, such as business travel, is likely to stay muted, she added. Cafaro stressed that in order for the economy to reach its full potential, there must be a strong uptake of the new COVID vaccines.

Cafaro also commented on investment in life science real estate, noting that inflows into the sector have never been greater. For its part, Ventas invested $1.3 billion into the sector during the pandemic, she pointed out.

Meanwhile, Sam Zell, founder and chairman of Equity Group Investments, said getting everyone back to work is “very, very important.” However, he added that the process could be “difficult, and will operate in spurts.”

During a keynote lunch session on day two of the conference, Zell said there is probably still upside potential in industrial real estate given the scale of conversion to online business, while the office sector faces “significant over-supply.” Price discovery in the retail sector is likely to occur once liquidations begin—which will probably be in the next six to eight months, he predicted. “There’s a lot of over-priced retail,” Zell said.

Barry Sternlicht, chairman of Starwood Capital Group, also participated in the conference. Asked if capital will keep flowing in the real estate sector, he said that it would. “We’re available to produce yield in a world that’s yield-less.”

He also noted that there hasn’t been a lot of distress yet in real estate, given that rates are low and banks are not eager to foreclose. As the economy re-opens, Sternlicht expects to see more distress and sales.

Among other observations made during the conference:

  • “The door is open for public to public (transactions), but not particularly wide open,” said Mike Kirby.
  • Peer to peer equity mergers in the office space are not all that likely. The question, rather, is whether there will be take-private deals, said Boston Properties, Inc. (NYSE: BXP) CEO Owen Thomas.
  • Victor Coleman, Chairman and CEO of Hudson Pacific Properties, Inc. (NYSE: HPP), said the REIT’s studio assets are benefitting from the “voracious appetite” for content, which is at a “pinnacle.”
  • Investors want growth, said Mary Hogan Preusse, founder and principal of Sturgis Partners LLC, and will be watching to see how companies deploy their strong balance sheets.
  • Lisa Palmer, president & CEO of Regency Centers Corp . (Nasdaq: REG), said she believes remote working will be one of the permanent changes from COVID. The pandemic has also reinforced the importance of last-mile facilities, she added.
  • Tech and life science companies are competing for the same office space, forcing life science companies to make faster leasing decisions, according to John Kilroy, chairman and CEO of Kilroy Realty Corp. (NYSE: KRC). He added that while office space isn’t going away, “it’s going to be used differently” in future.
  • Equity Residential (NYSE: EQR) President and CEO Mark Parrell noted that even before the pandemic, the affluent renters it targets were geographically dispersing. That trend is expected to accelerate, he said.
  • Sherry Rexroad, managing director, global real asset securities at BlackRock, said a focus on sustainability “makes good business sense in the long run.”
Article Author(s) Sarah Borchersen-Keto Featured Image Companies Boston Properties, Inc. Equity Residential Kilroy Realty Corporation Hudson Pacific Properties, Inc. Regency Centers Corporation Ventas, Inc. Prologis, Inc.
Sarah Borchersen-Keto

REITs Face Challenges in Taking Advantage of Green Subsidies and Incentives

1 month 1 week ago
REITs Face Challenges in Taking Advantage of Green Subsidies and Incentives Sarah Borchers… Mar. 30 2021 Teaser

Stephen Giordano, principal-Washington National Tax at KPMG LLP, participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Giordano discussed some of the tax issues that REITs may need to resolve as they continue to improve the energy efficiency of their properties, including the use of green subsidies and incentives.

“The first challenge is even being able to use the subsidy as it’s intended,” Giordano said. REITs, by design, often don’t have the taxable income necessary to use federal tax credits. State and local tax incentives, meanwhile, present different difficulties, he said.

Giordano also commented on the 2017 tax reform law, which limited the deductibility of interest under Section 163(j), and some of the outstanding issues in that area for REITs.

The question REITs primarily face is whether to opt out of 163 (j), Giordano explained. “That’s an important choice because once the election out is made, it’s irrevocable.” The decision is closely linked to depreciation decisions, he said, and where REITs are going to deploy their capital. Modeling, and getting the numbers right, is key, he added.

Meanwhile, Giordano discussed tax increment financing and some of the tax implications for REITs specifically in connection with this type of financing.

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Stephen Giordano, principal-Washington National Tax at KPMG LLP, participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Giordano discussed some of the tax issues that REITs may need to resolve as they continue to improve the energy efficiency of their properties, including the use of green subsidies and incentives.

“The first challenge is even being able to use the subsidy as it’s intended,” Giordano said. REITs, by design, often don’t have the taxable income necessary to use federal tax credits. State and local tax incentives, meanwhile, present different difficulties, he said.

Giordano also commented on the 2017 tax reform law, which limited the deductibility of interest under Section 163(j), and some of the outstanding issues in that area for REITs.

The question REITs primarily face is whether to opt out of 163 (j), Giordano explained. “That’s an important choice because once the election out is made, it’s irrevocable.” The decision is closely linked to depreciation decisions, he said, and where REITs are going to deploy their capital. Modeling, and getting the numbers right, is key, he added.

Meanwhile, Giordano discussed tax increment financing and some of the tax implications for REITs specifically in connection with this type of financing.

Article Author(s) Sarah Borchersen-Keto Featured Image Board Associates KPMG LLP
Sarah Borchersen-Keto

Industrial, Multifamily, Manufactured Housing Sectors “As Hot As Ever”

1 month 1 week ago
Industrial, Multifamily, Manufactured Housing Sectors “As Hot As Ever” drusignola@reit.com Mar. 29 2021 Teaser

Stout’s Jason Krentler says he is generally bullish on REIT M&A in the year ahead, particularly in certain sectors.

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Jason Krentler, managing director at Stout, participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Krentler said that in his 20 years working in the industry, the COVID-19 pandemic has been the greatest challenge he’s seen for REITs. During the 2008 financial crisis, he said the industry saw massive hits overnight to most sectors and the hardship was shared across the industry.

“Right now, in certain sectors, certain instances—retail, hospitality, even office—we’re seeing recovery periods that could take several years,” Krentler said. “It’s going to be fascinating to see how quickly human behaviors rebound for the sectors that are impacted.”

Turning to REIT M&A in the year ahead, Krentler said he and Stout are generally bullish, particularly in the industrial, multifamily, and manufactured housing sectors.

“We’re seeing the markets as hot as I’ve probably ever seen them,” he said. “[There has been] large year-over year growth, big demand, and cap rates that are really quite aggressive still on institutional assets.”

Watch more video interviews from REITwise 2021: Nareit’s Law, Accounting & Finance Conference:

Article Author(s) Diane Rusignola Featured Image
drusignola@reit.com

The Impact of the Tax Cuts and Jobs Act on REITs

1 month 1 week ago
The Impact of the Tax Cuts and Jobs Act on REITs drusignola@reit.com Mar. 29 2021 Teaser

Mayer Brown’s Remmelt Reigersman discusses how the 20% deduction for qualified business income and lowering of corporate income tax rates will impact REITs.

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Remmelt Reigersman, partner, tax transactions and consulting at Mayer Brown LLP, participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Reigersman discussed how the Tax Cuts and Jobs Act implemented by the Trump administration impacted his clients, noting that the 20% deduction for qualified business income will be a benefit to REIT investors.

“The law also lowered corporate income tax rates…[and] that benefits taxable REIT subsidiaries or REITs that might have a little bit of tax to pay,” he said.

Turning to how the Biden administration could impact REITs, Reigersman said he expects the corporate tax rate to increase from 21% to 28%. Regarding a recent infrastructure bill, he added that it remains to be seen if it will further expand REIT assets or income.

“An expansion of those rules would make REIT capital available as a source for infrastructure spending,” he said.

Reigersman added that a recently introduced related-party rent bill would allow REITs to financially help tenants, particularly in the retail sector.

Watch more video interviews from REITwise 2021: Nareit’s Law, Accounting & Finance Conference:

Article Author(s) Diane Rusignola Featured Image
Diane Rusignola

REITwise 2021 Recap

1 month 1 week ago
REITwise 2021 Recap drusignola@reit.com Mar. 29 2021 Teaser

The three-day virtual conference focused on legal, financial, tax, and accounting issues for REITs.

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Nareit’s REITwise 2021: Law, Accounting & Finance Conference convened 800 real estate executives and REIT industry professionals this week. The three-day educational program focused on current issues of importance for REITs and publicly traded real estate companies in all areas of legal, financial, tax, and accounting operations. The event attracted attendees from 250 companies, including 140 REITs, and featured 100 panelists.

Video interviews were also conducted with REITwise presenters and sponsors, and can be found online. General session coverage includes:

Read on for a recap of concurrent session presentations, and attendees may access all sessions on-demand through April 30.

REIT Operational Tax Issues

REITwise 2021’s March 23 operational tax issues panel included an exploration by: Jonathan Talansky, partner, King & Spalding; Mario Fulgieri, SVP, tax, Paramount Group, Inc.; and Steve Giordano, principal, Washington National Tax, KPMG; of issues relating to management of REIT taxable income, including through taxable stock dividends, like-kind exchanges, and analysis of the implications of section 163(j)’s interest deduction limitation. Giordano also examined some of the tax issues faced by REITs from “green” incentives and tax increment financing. Ashley Peeper, the panel’s moderator, VP, tax, Xenia Hotels & Resorts, also reflected on some of the issues for lodging REITs in evaluating taxable REIT subsidiary (“RIDEA”) leases in light of the pandemic’s devastating effect on travel over the last year.

Managing the Range of Financial and Non-Financial Reporting

Moderator Michael Walsh, SVP & CAO, Boston Properties, Inc. convened a panel of industry leaders that included Kyle Bolden, US-East Market Segment Leader – Real Estate, Hospitality & Construction, EY, Mneesha Nahata, SVP, Legal & Chief Sustainability Officer, American Tower Corporation, and Sara Neff, Senior Vice President, Sustainability, Kilroy Realty Corporation. This panel focused on how the role of the accountant has expanded from preparing financial information to now include non-financial information. The panel discussed how multiple departments within organizations collaborate to prepare non-financial reporting for many areas required by ESG benchmarks and new SEC rules such as human capital and ensure its validity through a combination of existing financial reporting controls and outside assurance provided by independent third parties.

Emerging Tax Issues

Donna Wagner, EVP, tax, JBG SMITH, and Cristina Arumi, partner, Hogan Lovells, reviewed some of the tax issues for REITs presented by “smart cities” in REITwise 2021’s March 24 panel, dovetailing with the discussion in the immediately preceding “Leveraging Technology to Drive Shareholder and Stakeholder Value” general session. Because of the pandemic, many REITs have experienced losses through closed properties and have assisted tenants with additional safety and distancing-related amenities, rent relief or renegotiating leases. April Ehrenbeit, senior director–tax, SITE Centers, described some of these amenities and their tax implications; Adam Cohen, SVP, tax, iStar Inc. and Safehold Inc., analyzed the tax consequences relevant to Section 467 leases, and Mark Van Deusen, principal, Deloitte, presented some the complex intricacies involving REITs and their use of net operating and net capital losses to offset taxable income and gains.

What's on the Minds of SEC & FASB Leadership

During this session, Julie Swinehart, CFO, RPAI, spoke with FASB Vice Chairman Jim Kroeker and SEC Deputy Chief Accountant John Vanosdall about the recent leadership changes at the SEC and FASB and their respective priorities as we move past the pandemic through 2021. FASB Vice Chairman Kroeker provided attendees with a status update on projects relevant to the real estate industry, including segment reporting, accounting for joint venture formation, and improving the accounting for business combinations and asset acquisitions.

Issues Tackled by General Counsels

Moderator Samantha Gallagher, general counsel of VICI Properties, convened four other Nareit member REIT GCs—Jim Brat, CTO and general counsel of Four Corners; Kay Tidwell, EVP, general counsel and chief risk officer of Hudson Pacific Properties; Taryn Fiedler, SVP, general counsel and corporate secretary of WashREIT; and Jim Snyder, EVP and chief legal officer of Americold Realty Trust—for a lively discussion of the many novel issues that REIT GCs encountered in the last year. Not surprisingly, much of the discussion focused on issues related to the pandemic and associated shutdowns, including their role as GC in addressing novel health and safety matters, the disparate adverse tenant impacts of the pandemic shutdowns, and matters related to insurance and SEC reporting of COVID impacts. The conversation also focused on human resource issues that arose during the pandemic and the impact of federal programs that affected certain tenants.

Tax Issues for REITs Investing Outside the U.S.

Industry experts Mike Anthony, managing director of Blackstone Real Estate Advisors; Rohn Grazer, managing director, tax of Prologis, Inc.; Lynn Kawaminami, partner, Deloitte LLP; Ana O’Brien, partner, Latham & Watkins; and Jennifer Xiao, SVP, tax, Digital Realty, discussed the tax operational dynamics of international expansion covering topics ranging from tax status of REIT operations in foreign jurisdictions, control procedures for foreign operations relevant to U.S. REIT status, joint venture structuring options, withholding, treaties and transfer pricing. The group also covered many of the evolving tax regimes and information reporting requirements relevant to multinational companies such as ATAD II, OECD Pillar II, DAC 6 mandatory disclosure and the multinational tax proposals on the horizon from the new Administration.

Post-Pandemic Business & Accounting Issues

This session provided information about the complexities in dealing with rent deferrals and rent abatement during the pandemic. The session further discussed the issues in projecting operating results and cash flows without further information on how vaccines will temper the pandemic so that retail store and restaurants can fully open. The panel also shared the significant legal effort in modifying many contracts, including leases and construction contracts.

SEC Legal Update

This panel of experts, which included: Jennifer Marietta-Westberg, principal, Cornerstone Research, and chair of the SEC’s Investor Advisory Committee; Karen Garnett, partner, Proskauer; and David Freed, partner, Mayer Brown, discussed the REIT implications of several major rulemakings that were finalized by the SEC last year. The panel also previewed some developing SEC initiatives and rulemakings that will affect REITs. The panel discussion of key 2020 rule changes, included several rules that are part of the SEC’s ongoing Disclosure Effectiveness Initiative, including the amendments to Reg S-K disclosures, and the amendments to MD&A disclosure. Also raised were recent SEC developments, including the SEC’s March 15 Request for Information on Climate Change Disclosure, the SEC’s recent announcement of an ESG Task Force and its plans to revisit the rules applicable to shareholder proposals.

REIT Tax Conundrums

A variety of REIT tax conundrums were considered at REITwise 2021 in a panel of the same name by: Julanne Allen, principal, National Tax Services, PwC; Jay Blaivas, partner, Morrison & Foerster; Ameek Ponda, partner, Sullivan & Worcester; Lorraine White, partner, Grant Thornton; and moderated by Neal Lewis, SVP, taxation, Duke Realty. Blaivas discussed partnership disguised sale issues when new partners join a previously disregarded partnership while Ponda discussed how to remediate REIT qualification failures. White shared some recent experiences with partnership audits under the Bipartisan Budget Act of 2015 (BBA), and Allen built on the Emerging Issues’ “smart cities” discussion, by exploring the definition of “rent” in the context of new income streams and business arrangements.

Post-Pandemic REIT Corporate Governance Issues

Troy McHenry, EVP, chief legal officer, general counsel and corporate secretary of Healthpeak Properties, Inc., moderated a panel of experts that addressed 2021 corporate governance developments from four different perspectives. The Biden Administration’s “all of government” focus on climate change includes a number of important SEC climate change disclosure and related ESG initiatives, which Evan Williams, director at Center for Capital Markets Competitiveness of the U.S. Chamber of Commerce, outlined for the panel. Scott Fenster, EVP and general counsel of Equity Residential, described EQR’s highly organized approach to ESG and DEI initiatives, which probably could be described as an “all of company approach,” because EQR incorporates executives from several corporate departments in its efforts and couples these with rigorous board oversight. Jim Hanks, partner at Venable, updated the panel on several 2021 proxy season issues important to all Maryland REITs. Donna Anderson, head of corporate governance of T. Rowe Price Associates, Inc. sketched out the perspective and expectations of REIT investors in 2021, noting that REITs are doing pretty well this year.

PCAOB & SEC Non-legal Update

Moderator Ermelinda Berberi, SVP & CAO, Paramount Group, Inc. convened a panel of experts that included Catherine Ide, VP, Professional Practice, The CAQ, Brandon Landas, Partner – National SEC Department, BDO, and Robert Ravas, Associate Chief Auditor, PCAOB. During the session, the panel discussed a multitude of topics including the reporting Critical Audit Matters (CAMs) in audit reports for the real estate industry, recent regulatory updates at the SEC and SEC comment letters trends. The panel discussed the SEC’s recent response to climate and ESG risks and opportunities, including the SEC’s request for information on Climate Disclosure, and the IFRS Foundation’s Consultation Paper on Sustainability Reporting. The panel also covered recent standard setting at the PCAOB and how the PCAOB responded to the pandemic by modifying the timing and scope of its reviews of audits of public companies.

Watch video interviews from REITwise 2021: Nareit’s Law, Accounting & Finance Conference:

Article Author(s) Diane Rusignola Featured Image Companies Xenia Hotels & Resorts, Inc. JBG SMITH SITE Centers Corp. IStar Safehold Inc. RPAI VICI Properties, Inc. Four Corners Property Trust Hudson Pacific Properties, Inc. WashREIT Americold Realty Trust Prologis, Inc. Digital Realty Duke Realty Corporation Healthpeak Properties, Inc. Equity Residential Boston Properties, Inc. American Tower Corporation Kilroy Realty Corporation Paramount Group, Inc. Board Associates EY
drusignola@reit.com

Private Equity Firms Awaiting the “Right Opportunity” with REITs

1 month 1 week ago
Private Equity Firms Awaiting the “Right Opportunity” with REITs drusignola@reit.com Mar. 29 2021 Teaser

Deloitte’s Jeff Smith says that firms have already raised funds and he expects an uptick in REIT M&A toward the end of the year.

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Jeff Smith, U.S. Real Estate Leader at Deloitte LLP, participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Smith said that the landscape for REITs has shifted amid the pandemic, noting that real estate companies were in a better position heading into the current crisis than they were heading into the financial crisis in 2008.

“Debt-to-equity ratios are much more favorable, debt is laddered appropriately, and the maturities are longer,” Smith said. “[And] there really hasn’t been overbuilding going into the pandemic like there was before.”

He added that market fundamentals are strong and interest rates are at an historic low.

Smith said that private equity firms have raised funds and are ready to invest, but are waiting for the right opportunity, which could come via distressed sales, shifts to both hot and cooling markets, or real estate companies simply sticking to markets that they know.

“Toward the backend of 2021, we’ll start to see some activity [in REIT M&A],” Smith said.

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Article Author(s) Diane Rusignola Featured Image
drusignola@reit.com

REITwise 2021 Speaker Robert Greene Addresses Broad Benefits of Adopting DEI Strategies

1 month 1 week ago
REITwise 2021 Speaker Robert Greene Addresses Broad Benefits of Adopting DEI Strategies Sarah Borchers… Mar. 29 2021 Teaser

Greene stresses that DEI is about all of us, not some of us.

Content

Robert Greene, president and CEO of the National Association of Investment Companies, spoke during the closing general session of REITwise 2021: Nareit’s Law, Accounting & Finance Conference on why diversity, equity, and inclusion (DEI) matters more than ever, and how organizations benefit from DEI strategies.

Greene set the stage for his talk by highlighting a few key disclosures and acknowledgements, including:

  • DEI is about all of us, not some of us.
  • Race is a critical element of diversity and can be difficult to discuss among people who do not know each other.
  • Unconscious bias is real. We all have areas of unconscious bias based on our life experiences, parental and family teachings, exposure or lack of exposure to others, our social networks and other factors.

Throughout his presentation, Greene emphasized the core elements, benefits, and virtues of diverse organizations, and explained that motivations for diversity differ, and efforts to increase and support diverse companies elicit different tactics and outcomes.

Several benefits he described included:

Bigger talent pool

“We have an extraordinarily talented country, great universities, and places where people gain interesting experiences. Companies should broaden their talent pool for a competitive advantage.

Increased employee engagement and trust

People who you work with wonder where they fit in, are they trusted, are they respected. Even top performers. Having a program that allows people to compete, perform, and feel respected, helps them have more trust in the organization, which oftentimes leads to a more high- performing organization.”

New perspectives and innovation

“Innovation doesn’t occur at a center of an ecosystem. Innovation occurs on the edges of a network, and the edges are ultimately about being diverse and inclusive.”

Better decision making

“If more perspectives are brought to bear then more factors can be effectively considered. More people who will be impacted by decisions involved in decision making, along with more data, make for better decisions.”

Improved performance

“There is a business case to have diverse organizations – more diversity can lead to stronger business results and profits.”

Greene also addressed how diversity is a value and should be aligned with the other values in an organization, such as transparency, integrity, appreciation, quality, and performance, and that belonging is the best outcome for any organization’s DEI efforts. Without a complementary blend of diversity, equity and inclusion, the organization will not be engaging the full potential of the individual, will not find where innovation thrives, or where views, beliefs, and values are integrated.

Importantly, Greene also addressed what doesn’t work to solve a diversity problem in an organization:

  • Assuming a lack of complaints mean that people feel included.
  • Hiring a few diverse people and hoping they stick.
  • Celebrating various cultural and heritage months without meaningful dialogue.
  • Engaging in a diversity plan that doesn’t require the active engagement of everyone at every level.
  • Hiring a chief diversity officer and expecting her/him to solve everything.
  • Trying but not succeeding, then returning to past practices.
  • Not establishing metrics.
  • Not holding people accountable.

He wrapped up his presentation by outlining five practical things that every professional can do to push past discomfort:

  1. Educate yourself and your organization.
  2. Develop closer relationships with a broader array of members of your team/firm. Ask them to tell you their story and ask for feedback regularly.
  3. Give different people the opportunity to prove their worth. Talent is broadly distributed but opportunity is not. Spend less time thinking about how things have always been done and more leveraging the best of your team.
  4. Make this important to your team by making it important to you. It has to start at the top and you’ve got to be consistent and be deliberate.
  5. Get involved in the community – your internal communities – people doing different things, talking about different things, thinking differently so you can have the benefits of their knowledge and how they see things.

Follow Robert on LinkedIn.

Article Author(s) Katie Feldman Featured Image
Sarah Borchersen-Keto

Technology Investment and Digital Transformation a “Necessary Evolution” in Real Estate

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Technology Investment and Digital Transformation a “Necessary Evolution” in Real Estate llees@nareit.com Mar. 29 2021 Teaser

The pandemic has accelerated the adoption of certain technologies and forced many executives to begin rethinking how to utilize and leverage real estate.

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The pandemic has only highlighted how integral technology is to our day-to-day lives, and it will continue to play a key role in the economic recovery. During Nareit’s REITwise: 2021, Law, Accounting & Finance Conference, panelists joined the general session, “Leveraging Technology to Drive Shareholder and Stakeholder Value,” via video call, further illustrating this point.

“In some ways the pandemic has highlighted the need for technology,” noted Umar Riaz, EY Americas real estate, hospitality and construction advisory leader.

For some sectors, the pandemic has been an accelerator for technology adoption. Multifamily, in particular, has seen this adoption accelerated out of necessity, said John D’Angelo, managing director/U.S. real estate sector lead at Deloitte Consulting, as residents have sought touchless experiences or methods of interacting with management virtually.

Brad Greiwe, co-founder and managing partner at Fifth Wall, said that a lot of the demand for technology is being driven by operational deficiencies. Fifth Wall’s research shows many mature industry groups spend 8-10% of industry revenue on research and development, while real estate spends less than 1%. “That spend is not going to be optional,” added D’Angelo, pointing to the need for the real estate industry to prioritize investing in technology and R&D.

Moderator Sourav Ghosh, EVP, CFO, and treasurer at Host Hotels & Resorts (Nasdaq: HST) acknowledged the industry’s lag in this area. “That evolution, it’s not a matter of if, it’s a matter of when.”

The Challenges of Digital Transformation in Real Estate

Panelists agreed that digital transformation is an intimidating task. It is a long-term process that is more about the actions taken to get there than a singular event, said D’Angelo. “The big key to success is management’s belief that change needs to happen…that it’s either an imperative for the business or that it’s going to drive future success.”

Greiwe added that technology is only one piece of it, though. Often organizations need to undergo a culture shift to take full advantage of the technologies available.

Evan Regan-Levine, EVP, strategic innovation & research at JBG SMITH (NYSE: JBGS), advised that it can be easy to get distracted with flashy technologies, but for digital transformation to be successful it’s important to stay focused on how to utilize technology to drive the success of the core business.

He also shared insight into how JBG SMITH has approached digital transformation. The REIT creates the place that attracts the tenants and invests in the infrastructure that enables positive tenant amenities. They leverage the real estate to help facilitate the technology and make it a benefit to tenants, but their role is not in providing technology solutions per se. “We’re serving as an enabler and placemaker.”

How Data and Machine Learning Can Impact Business Decisions

Capturing data from multiple systems, particularly when combined with machine learning, can help inform business decisions and allow real estate owners to better anticipate the needs of tenants. D’angelo said, “there’s so much value to be gained in capturing the data, making sense of it, and triggering actions based on it.”

Speaking to JBG SMITH’s approach, Regan-Levine said, “it’s sort of the holy grail” to create a centralized source of data. The REIT builds predictive analytics to better understand tenant needs and demand drivers. Aggregated data can help influence development decisions, and a true “common data environment” is the long-term goal to help drive the way the company operates its real estate.

Ultimately, the panelists agreed, it comes down to more investment in technology. The industry needs to think about not only transforming digitally but transforming analytically, Riaz said. “Investing in data analytics is immediate ROI—whether it’s a better, more accurate valuation, better rental deals, or more efficient buildings.”

The Role of Technology in Developing Solutions for Sustainability

Data and technology also play a key role in sustainability initiatives. Tackling climate change and effectively developing solutions to reduce the carbon footprint of real estate, however, will likely require industry leaders to adopt a collaborative approach to effectively scale the technologies necessary to create significant change.

JBG SMITH is seeing an increasing number of investors asking about ESG, said Regan-Levine. He noted it can be challenging to balance the needs of investors, regulators, and tenants, though. Sustainability is a long-term investment, but “the short-term capital investment and that expectation of ESG practices is still a challenge for our industry.”

Greiwe suggested that tenants will start demanding sustainability, and it’s important to think about it holistically. He predicted a shift in what it means to own and operate real estate as sustainability comes to the forefront of consumers’ minds and demand accountability from businesses. Sustainability ultimately creates operational efficiency and brand value, though, and he suggested real estate owners “turn a reactive conversation into a proactive one.”

Ghosh agreed. “It’s not just about ESG technology—you can invest in it—but you can also drive operating efficiency.”

Climate change is an industry issue, and the industry as a whole needs to work together in order to develop scalable, impactful solutions. Riaz pointed to the success of the automotive industry in collaborating to upgrade their supplier base for electric batteries. Now, the technology is so affordable that he predicts most companies will retire their gasoline engines in the next decade.

Panelists agreed that a change is on the horizon. The pandemic has accelerated the adoption of certain technologies and forced many executives to begin rethinking how to utilize and leverage real estate. Regan-Levine said “cities aren’t finished. Real estate as we know isn’t finished. But it is changing.”

Article Author(s) Lizzy Lees Featured Image Companies Host Hotels & Resorts, Inc. JBG SMITH Board Associates EY
llees@nareit.com

Pandemic Highlights Importance of Disclosures

1 month 2 weeks ago
Pandemic Highlights Importance of Disclosures drusignola@reit.com Mar. 26 2021 Teaser

BDO’s Brandon Landas says clear and transparent disclosures help investors better understand REITs.

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Brandon Landas, partner in the National SEC Department at BDO, participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Landas discussed a REITwise conference session he co-presented titled “PCAOB & SEC Non-legal Update.” He said his focus on the current regulatory environment is twofold: understanding and implementing a number of new rules; and paying attention to SEC staff speeches and activities to understand the direction the commission may be going in the future.

“Right now, we’re in a bit of a flux,” Landas said. “This commission is at four members, and we’re waiting on the final confirmation of President Biden’s nominee Gary Gensler to become the chairman.”

From a financial reporting perspective, Landas said the pandemic brings up the importance of clear and transparent disclosures.

“Key performance indicators have always been an important measure to be presented for REITs and their investors,” he added. “Similarly, disclosures about trends impacting the company or expected to impact the company in the future provide investors with a more comprehensive picture of the company.”

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Article Author(s) Diane Rusignola Featured Image
drusignola@reit.com

A Variety of Rental Streams Can Qualify as Rents for REITs

1 month 2 weeks ago
A Variety of Rental Streams Can Qualify as Rents for REITs drusignola@reit.com Mar. 26 2021 Teaser

PwC’s Julanne Allen says the IRS has taken a view that income for the use or occupancy of space can often qualify as rent.

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Julanne Allen, principal, National Tax Services at PwC, participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Allen discussed a REITwise session on REIT tax conundrums that she was a panelist on. She said that because there are so many nuances and permutations of the rules that govern REITs, it’s easy to have a misstep that can put a REIT’s status in jeopardy.

“Sometimes these foot faults are discovered in the ordinary course of the REIT’s business, but frequently [they] aren’t discovered until there’s an M&A deal,” Allen said. “An experienced tax advisor is invaluable, not only to identify any potential failures, but also to provide options to remediate these failures.”

Allen said that as REITs acquire more and more asset classes, questions are arising about whether or not an income stream qualifies as rent or not. She said the IRS has taken a view that income for the use or occupancy of space in or on real property can qualify as rent, noting that it has to be structured in the appropriate manner and generally long-term.

“A variety of new assets that we’re seeing can have a variety of rental streams that qualify as rents,” Allen said.

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Article Author(s) Diane Rusignola Featured Image
drusignola@reit.com

Today’s Technology Can Meaningfully Enhance REIT Asset Values

1 month 2 weeks ago
Today’s Technology Can Meaningfully Enhance REIT Asset Values drusignola@reit.com Mar. 26 2021 Teaser

Sourav Ghosh discusses Host Hotels’ predictive analytics that allow the REIT to determine hotel market performance.

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Sourav Ghosh, EVP, CFO and treasurer at Host Hotels & Resorts, Inc. (Nasdaq: HST), participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Ghosh discussed a REITwise general session that he moderated titled “Leveraging Technology to Drive Shareholder and Stakeholder Value.” He said that technology today allows REITs to process and create insights from a huge amount of data in all forms.

“At Host Hotels, our IBM Watson predictive analytics model mines over one million structured data points and three million unstructured data points to help us anticipate which hotel markets are likely to outperform, versus underperforming in the medium- to long-term,” Ghosh said.

Ghosh added that technology can meaningfully enhance asset values by either improving the topline, reducing operating expenses, or doing a combination of both that ultimately enhances overall operating performance.

Turning to the pandemic, Ghosh said it has created an opportunity to completely reassess the interoperating model.

“Customer expectations will evolve, and we must consider how technology can be integrated into the operation to more efficiently and effectively deliver superior customer experiences,” he said.

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Article Author(s) Diane Rusignola Featured Image Companies Host Hotels & Resorts, Inc.
drusignola@reit.com

REIT General Counsels Saw Roles Broaden During Pandemic

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REIT General Counsels Saw Roles Broaden During Pandemic Sarah Borchers… Mar. 25 2021 Teaser

WashREIT’s Taryn Fielder also stresses need to be proactive on cybersecurity matters.

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Taryn Fielder, senior vice president, general counsel and corporate secretary at WashREIT (NYSE: WRE), participated in a video interview in conjunction with REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Fielder discussed the changing role of REIT general counsels as a result of the pandemic. She noted that working with front line workers was a primary challenge and “focused the role of general counsel more as a human resources advisor and partner in a way that may not have been previously.”

Once out of crisis mode, Fielder said, it was one issue after another. “I don’t think anyone takes on the job of general counsel without being prepared to dive into the deep end and realize there’s a lot you don’t know, that you’ll still be asked to opine upon. The events of 2020 just broadened that even more so,” she said.

Fielder also commented on the involvement of general counsels in ESG matters. “If general counsels aren’t involved in ESG then that’s probably a mistake,” she said.

Turning to matters of cybersecurity, Fielder commented that “the best path forward is to be as proactive as possible…it’s something we think about every single day. There’s no opportunity to turn away from it because the bad actors just have so many opportunities.”

Watch video interviews from REITwise 2021: Nareit’s Law, Accounting & Finance Conference:

Article Author(s) Sarah Borchersen-Keto Featured Image Companies WashREIT
Sarah Borchersen-Keto

KPMG’s Constance Hunter Outlines Economy’s K-Shaped Trajectory at REITwise 2021 Session

1 month 2 weeks ago
KPMG’s Constance Hunter Outlines Economy’s K-Shaped Trajectory at REITwise 2021 Session Sarah Borchers… Mar. 24 2021 Teaser

Hunter also sees “massive applications” for Blockchain.

Content

Constance Hunter, chief economist at KPMG, outlined how the pandemic has created a K-shaped economy—with a strong bifurcation between different industries, geographies, and households—during a general session at REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Hunter was broadly positive on the outlook for the economy. She said the trajectory of U.S. GDP growth has been hampered by COVID-19 but should return to pre-COVID levels in the second quarter this year. She added that the U.S. is expected to return to trend growth GDP faster than any other country.

Growth in U.S. GDP is expected to be close to 6.5% in 2021, helped by a “very strong” spending impetus that is likely to carry over into 2022. In 2023, Hunter pointed to the possibility of “above potential” GDP growth, helped by fiscal and monetary policy tailwinds currently in place.

“I do think there is a strong possibility that we have a turbo-charged productivity growth period in the years to come and that the difficulty of the pandemic has forced us to be more efficient and productive and that that will have positive implications for the economy going forward,” Hunter said.

Among Hunter’s other observations:

· Cities that experienced a decline in rent during the pandemic could see an uptick in demand once more normal routines resume.

· Increased digital transformation should have tailwinds for economic growth for years to come.

· The U.S. will be the engine of global growth for the next several years.

· Any increase in services inflation is unlikely before the end of 2021.

· A sharp decline in labor force participation hints at a lid on wages.

· Governments are not going to let crypto become the dominant currency, although there are going to be fiat digital currencies issued by central banks within this decade. “It’s very unclear what the final chapter is going to be for crypto…I’m not so sure that in the long run crypto currencies are going to hold their values or even be full-fledged currencies.”

· Blockchain has the ability to improve record keeping and provenance information. “There’s massive applications for Blockchain.”

Watch video interviews from REITwise 2021: Nareit’s Law, Accounting & Finance Conference:

Article Author(s) Sarah Borchersen-Keto Featured Image
Sarah Borchersen-Keto

REITwise 2021 Panel Explores Changing Nature of REIT Industry

1 month 2 weeks ago
REITwise 2021 Panel Explores Changing Nature of REIT Industry Sarah Borchers… Mar. 24 2021 Teaser

Barclay’s Scott Schaevitz moderated panel on the state of the capital markets.

Content

The changing nature of the REIT industry, notably the rise of companies that are at the forefront of the new economy, was one of several themes discussed during the State of the Capital Markets general session at REITwise 2021: Nareit’s Law, Accounting & Finance Conference.

Scott Schaevitz, co-head of Americas real estate investment banking at Barclays, moderated the panel. He noted that the “new universe of REITs” has forced traditional real estate bankers to gather knowledge from specialists in other industry groups across their firms.

“We’re definitely seeing a change in the way we need to do business to make sure that we are providing what we need…to our clients,” Schaevitz said.

Nora Creedon, a managing director at Goldman Sachs & Co., described a “complete transformation of the REIT world,” with 50-60% of investable companies representing “more nichier areas” that tend to be growth oriented.

Creedon added that the “FANG” dynamic of the REIT market—a reference to the high-growth tech companies—has only accelerated over the past year.

Gina Szymanski, a managing director at AEW and a portfolio manager in the firm’s real estate securities group, added that the growth of niche sectors has resulted in a different view on how to value companies.

The panel also looked at the change in the REIT investor base.

Jay Johnson, EVP & CFO at Lamar Advertising Co. (Nasdaq: LAMR), noted that the company is beginning to see investors rethink their definition of real estate. “Investors, because of how well the alternative asset classes have done, are almost being forced to look at these other alternatives,” he said.

Ben Jenkins, chief investment officer at Colony Capital Inc. (NYSE: CLNY), noted that within both real estate and infrastructure, the company has been an outperformer. “Digital infrastructure, writ large, has performed extremely well relative to almost any asset class. That has certainly attracted attention and capital,” he said.

Other topics covered by the panel included:

  • M&A:

Johnson noted that Lamar “turned on the acquisition engine” in late 2020, and the company is “open for business.”

Creedon pointed out that “people want to see well-capitalized companies dip their toe into the acquisition market.”

Schaevitz added that companies are taking a much more disciplined approach to acquisitions: “The pie-eating contest is over.”

  • ESG:

Johnson said Lamar is beginning to explore how it communicates its ESG strategy. He added that the U.S. continues to lag Europe with regard to ESG matters.

Jenkins noted that Colony Capital is being more intentional about how it records and reports its ESG activities.

Creedon observed that any companies taking a “check the box” approach to ESG “will miss out big time.”

Szymanski added that measurability of ESG remains a challenge. “The S in ESG is obviously very tricky.”

  • Balance Sheets:

Szymanski said companies are much more disciplined today than during the financial crisis. Creedon, meanwhile, said she would be more open to companies taking their leverage to a higher level if it enabled them to find good opportunities to grow.

Article Author(s) Sarah Borchersen-Keto Featured Image Companies Lamar Advertising Company Colony Capital, Inc.
Sarah Borchersen-Keto