Wall Street Transcript Interview with Alexander D. Goldfarb, Managing Director and the Senior REIT Analyst for Sandler O'Neill + Partners, L.P.: Bullish Outlook on REITs as Investors Are Starved for Yield
67 WALL STREET, New York - October 24, 2012 - 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, Equity Analysts and Money Managers. 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 - Real Estate New Supply - Inexpensive Access to Capital - Apartment, Lodging, Self-Storage and Office REITs
Companies include: Camden Property Trust (CPT), Developers Diversified Realty (DDR), Post Properties Inc. (PPS), Avalonbay Communities Inc. (AVB), Kimco Realty Corporation (KIM), Simon Property Group Inc. (SPG), Brookfield Asset Management In (BAM), SL Green Realty Corp. (SLG), Boston Properties Inc. (BXP) and many others.
In the following excerpt from the REITs Report, an expert analyst discusses the outlook for the sector for investors:
TWST: Please start with a quick snapshot of your REIT coverage universe to set the stage for readers.
Mr. Goldfarb: We cover a mix across sector - apartments, student housing, shopping centers, malls, office, industrial and health care. In total we cover roughly 35 names.
TWST: That's diverse in terms of property type. Do you have an overall outlook for the entire coverage universe?
Mr. Goldfarb: Overall, we're still bullish on the REITs. As we've discussed before, our view has been that there is a need for total return. We have a world that's still starved for yield, and with the Treasury around 1.6%, 1.7%, that doesn't work for long-term pension hurdles that require an 8% return. Real estate, even at today's valuations, because you have positive spread between financing costs and acquisition costs, you can easily achieve those 8% targeted returns that institutional investors seek, and it's just a very attractive sector.
If you think about it, today, when you buy real estate, it's positive leverage, meaning there is a positive difference between financing costs and acquisition costs. You can get long-term money at very attractive rates, there is very little threat of new supply, and you can underwrite existing rents, whereas, if you go back to the peak in 2006 or 2007, you were looking at negative leverage on a long-term basis, you were looking at having to underwrite aggressive rent growth, and you were facing the threat of competitive supply. So when you think about it, buying real estate today is a much easier decision, it's a much better environment to buy, because the math is much simpler and the competitive threat is greatly diminished.
TWST: What property sectors do you find most favorable today?
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.
