A panel of REIT dedicated and generalist investors at Nareit’s REITworld: 2020 Annual Conference discussed the implications of the COVID-19 crisis for REIT investment strategies.
Michael Bilerman, managing director at Citi, moderated the event. Panelists included: Nora Creedon, managing director at Goldman Sachs & Co.; Jonathan Simon, managing director, portfolio manager, value equity funds at JP Morgan Asset Management; and John Vojticek, managing director, CIO and global portfolio manager at DWS.
Simon, a generalist investor, said he views the REIT space as a microcosm of the current market as a whole.
“The fundamentals are improving. Quarter by quarter so far, it looks as though things are getting a little bit better for the more challenged sectors,” Simon said. “The trends are in the right direction.”
Creedon said that as a dedicated REIT investor, she’s optimistic that even through the current coronavirus surge, investors will be focused on the successful rollout of a vaccine and looking ahead to a new normal post-COVID, including new opportunities for the office sector.
“In the dedicated REIT world, nobody wants to miss that trade again,” Creedon said. “You can’t afford to miss that trade again.”
Simon that he takes a long-term approach toward REIT investing.
“I’m going to stick through the tough times, the macro risks, over the next six months, and assume that the companies we’re invested in have the wherewithal to survive,” he said. “I feel pretty comfortable with the valuations.”
Turning to the cities versus suburbs debate, Vojticek, who is based in Chicago, said he doesn’t believe that millennials will want to continue living in the suburbs post-COVID.
“The reason why you have so many people moving from these big complexes in the suburbs of Chicago to downtown, was to attract the talent that is in downtown,” Vojticek said, adding he is more bullish on residential in big cities than he is on office over the next 12 to 18 months.
Creedon, however, said that older millennials who have purchased single family homes in the suburbs are not likely to return to cities. Bilerman pointed out that after 9/11 though, a situation that could be similar to the COVID-19 crisis in terms of residential trends, there was a “migration out [of the city], and people did come back, because they missed it.”
The panel also discussed the importance of environmental, social, and governance issues for REIT investors.
Vojticek said that governance continues to be the main differentiator among companies when it comes to relative valuation. Creedon added though that investors do genuinely care about environmental and social issues as well, and will even more so post-COVID-19.
“We just went through a global pandemic, and I do think people care about, ‘How did the apartment companies treat their tenants?’” she said. “Issues like that are going to become more and more important.”