REITs and the End of Rate Hikes
About Face
REITs and the End of Rate Hikes
Fed watchers are beginning to notice a shift in tone. Words like "sufficiently restrictive" are starting to pop up in transcripts. If the Fed is in fact done hiking rates, REITs could see a tailwind. Research from CenterSquare suggests REITs perform well following the end of a hiking cycle, outperforming not just the S&P 500 but also Private Real Estate.
Real Estate is an interest rate sensitive asset class. As CenterSquare explains,
"... during times of rising rates, public markets tend to discount rate-sensitive assets such as real estate, and build in an associated risk premium that then creates a true discount and subsequent upside opportunity when the regime changes."
REITs have certainly been among the hardest hit asset classes as the Fed sought to dampen inflation, and many REITs are now trading below reasonable expectations of Net Asset Values. As a result, many investors may find themselves under allocated to the asset class.
Big Theater, Still a Small Door
BREITs Asset Flight Slows
In its latest quarterly letter the non-traded REIT behemoth said that redemption requests from the vehicle had slowed.
"We are pleased to see a noteworthy decline in repurchase requests, with requests 28% lower than last month."
Investors may not find the news as inspiring as redemptions remain gated. Investors asked for $2.1 Billion of their money back in September, that's less than the $3 Billion they requested in August and well below January's $5.3 Billion of redemption requests. Blackstone said they would fulfill $625 Million of September's requests.
Quote Book
Prologis' Hamid Moghadan on AI
"I don't think you can be on the fence on this issue. I think it's a big, fast-moving train and you better get on it or you're going to get run over by it... But before you can engage with AI and get value out of it you have to have data, and have it digitized. Without data, AI is useless."
- Hamid Moghadan, CEO Prologis (CoStar)
KKR's Matt Salem on the Rise of Private Credit in Commercial Real Estate
"Banks represent roughly 40 percent of the overall lending market. We think they’re pulling back, and it’s pretty clear someone has to step into that void. The two places that we think will be outlets for that capital will be alternative lenders, like ourselves, and capital markets, like commercial mortgage-backed securities (CMBS). Those are both areas we’re very actively involved in."
- Matt Salem, Head of Real Estate Credit KRR (Commercial Observer)
Distressed Office Buyers? Your Local University.
“Universities are taking advantage of the soft market fundamentals right now in the leverage they have as a tenant, especially in the downtown market, where vacancy is still very elevated at historic highs...”
- Michael Hartnett JLL Mid-Atlantic Research (Bisnow)