Wall Street Transcript Interview with Anthony Paolone, Senior Equity Research Analyst for REITs and Real Estate Service Stocks for J. P. Morgan: Organic Growth, Acquisitions and Development Drive Earnings Growth for REITs

Wall Street Transcript

67 WALL STREET, New York - June 21, 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, 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 - Inexpensive Access to Capital - Apartment, Lodging, Self-Storage and Office REITs

Companies include: CB Richard Ellis Group, Inc. (CBG), Jones Lang Lasalle Inc. (JLL), Kilroy Realty Corp. (KRC), Essex Property Trust Inc. (ESS), Simon Property Group Inc. (SPG), Washington Real Estate Investm (WRE), Boston Properties Inc. (BXP), Vornado Realty Trust (VNO), Realty Income Corp. (O) and many others.

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

TWST: What property sectors are you most optimistic about right now? How are the actual property market fundamentals faring?

Mr. Paolone: Property fundamentals have largely been OK. You generally have seen occupancies increasing, rental rates going higher, and pricing power gradually moving into the hands of the landlords. But it's been slow. In the office business, for instance, what you would normally see at this point in the cycle is higher occupancy levels and greater pricing power in the hands of landlords, but because the recovery has been fairly slow and because you've seen tenants, corporations largely, still being somewhat cautious in their expansion plans and trying to fit more people into the same amount of space or not take too much space because of uncertainty over their growth plans, that has kept fundamentals in the office business fairly modest. So that's one area that, while positive, is very marginally positive.

In the mall space, things have been strong. You've seen sales productivity in most quality malls move up pretty dramatically. Most of the mall REITs are still enjoying double-digit rent spreads on new leasing. So that's a good place to be, and we've liked that space.

The apartment business has shown continued pricing power, even though there is supply coming over the course of this year and into next year. We've had a bit of a nonconsensus view, we think, on the apartment business, which is to say that in 2012, we didn't like apartment REIT stocks. In 2013, we think now is the time to step back into them. They have been very unpopular because of the concern over supply, and also because of the improvement in the general housing market and people preferring to play housing trades, perhaps, instead of the multifamily business. But we don't think that those are reasons necessarily to not own these stocks, because they actually represent a good deal of value right now.

In the strip center space...

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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