A More Neutral Stance on Future REIT Performance: David Toti, Senior Managing Director at Cantor Fitzgerald, Interviews with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - June 26, 2013 - The Wall Street Transcript has just published its REITs Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Acquisition and Financing Costs - Pricing Power Outlook - Residential and Commercial REITs - Inexpensive Access to Capital - Apartment, Lodging, Self-Storage and Office REITs

Companies include: ProLogis (PLD), SL Green Realty Corp. (SLG), Boston Properties Inc. (BXP), DuPont Fabros Technology, Inc. (DFT), Mid-America Apartment Communit (MAA), Associated Estates Realty Corp (AEC), Post Properties Inc. (PPS), Public Storage (PSA), Parkway Properties Inc. (PKY), EastGroup Properties Inc. (EGP), Cortex Pharmaceuticals Inc. (COR), Home Properties Inc. (HME), Sovran Self Storage Inc. (SSS), Extra Space Storage Inc. (EXR), CapLease, Inc. (LSE), Realty Income Corp. (O) and many more.

In the following excerpt from the REITs Report, an expert analyst discusses the outlook for the sector for investors:

TWST: In terms of the other property subsectors, would you consider any best or worst choices?

Mr. Toti: We tend not to make sector calls; our approach is to make an overall REIT call, and then we stock pick. But our calls do add up to subsector calls, if you will. In office we tend to be more concentrated in CBD portfolios, in terms of our "buy" recommendations, versus the suburban markets. We view the suburban markets as still being pretty bad in terms of fundamentals.

It doesn't mean some of the companies can't succeed at the leasing level, but the valuation, the cap rate compression, transaction activity, overall demand remains relatively weak, whereas it's clearly picking up in core CBD markets like New York, San Francisco, Boston, etc. So again, concentrate on CBD in office.

In industrial we tend to be pretty mixed as well. Our top pick in the group is still Prologis (PLD). We tend to avoid some of the lower B, C quality portfolios, so a similar story in terms of a preference for quality in that group. Again, fundamentals are improving, but they are still not great.

Data centers, that's been a very interesting space. I'm sure you know some of the background there - there have been hedge funds very active in the group - that's been the most volatile of all the subsectors for the past year. It's a call we've gotten right. Our view on the data centers is volatility is going to remain, so the risk is going to be elevated. Based on our research, fundamentals still remain pretty much intact, although there are more question marks today than there were a year ago. Demand is still growing exponentially; the question is on the supply side. How much of that is being sopped up? And how is that demand transforming over time as it moves very rapidly from direct providers to the cloud? I think all the moving parts in the data center space from a supply/demand perspective make it very hard to underwrite the long-term value of these assets. I think that's what many investors struggle with today - is the depreciation on these assets real, and do they have a finite life given the speed at which the technology and the demand equation changes?

TWST: You've mentioned Prologis in industrial. What are your other top investment ideas right now?

Mr. Toti: We like SL Green (SLG) in New York. We think that...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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