Leading global real estate investors share their thoughts on current global marketplace conditions.
These experts discuss the development of REIT-like investment vehicles worldwide, global
REIT allocations, as well as the pros and cons for going global.
Steve Burton
Director at ING Clarion Real Estate Securities
The top-down rationale of why global securities make sense is that you double the opportunity set of investments. Stated differently, the U.S. is about half of the total global pie. By looking beyond the U.S. borders, you suddenly have a lot more to choose from, a lot more potential opportunity.
The increased adoption of the REIT-type structure is very
important because it tends to cause dividend yields to rise. The companies have to pay out most, if not all, of their taxable net earnings as a dividend to the shareholders, and any valuation discounts to net asset value (NAV) tend to begin to close.
As you look at the countries around the world with REIT-type structures—the U.S., Australia, the Netherlands, Belgium and now France—any discount to NAV tends to erode. In fact, the stocks trade at premiums in some of those countries, especially Australia and the U.S., over time.
Bruno Guiot
Head of ATF development at AXA Investment Managers
The implementation of the REIT structure is progressing everywhere. Within two years it is going to be set up in the major countries. You also have the implementation of the EPRA/NAREIT Global Real Estate Index, which gives you the necessary benchmark to compare your exposure to an index. It's absolutely necessary to have a well-defined, fine-tuned mapping of the sector.
An upward trend will help attract a broader audience. We are seeing a broader range of product and strategy. Now you not only have an asset class, but a mapping of different styles. Whether you want to invest globally, regionally, or on a country basis, you can do it. If you want to go for a sector approach, you can do it. You are able to do that because you have a mapping structure and you have a well-defined index series attached to it.
What you are going to have is the capacity not only to invest in real estate for the long run, but also to manage your exposure for the short run. Not only are you going to broaden the audience, you are also going to deepen the analysis of the market, which will bring more transparency and more liquidity.
Robert-Jan Foortse
Senior portfolio manager at ABP Investments
We've heard the other panelists indicate that real estate is becoming a global business, and I think that's true, definitely. We see global partnerships, global companies emerge, and especially the global capital market in real estate evolve. On the other hand, it's still real estate. That building we invest in is somewhere and you can kick those bricks and mortars. It has local tenants, or if it's a shopping center, it has local customers, so it's still a local business.
I think it's inevitable that as the sector globalizes, you get more synchronization. In fact, you're seeing that already in retail, which has really been the first sector at the company-level to globalize. The Westfield Group (ASX: WDC) is a good example. You've also got companies like Simon Property Group (NYSE:SPG) buying portfolios in Europe, and I think that trend will continue.
Still, there's always something inherent about real estate, which is it's a local business. That's never really going to change. You're always going to have a relatively high level of diversification in my view, despite convergence, from a global real estate allocation.
Michael Giliberto
Managing director with JPMorgan Fleming Asset Management
If you start with one foot in the property markets and you begin to step out domestically into a listed market, there certainly look to be benefits and they're going to vary. The percentages you use, how you tackle it, is going to vary, country by country.
You can have a stock porfolio and sell stock to generate cash flow, but that's a lot more work than just getting your dividend coming through on a periodic basis. So I think we're going to see a lot of movement to real estate in general, and then, for most people, the listed real estate is really going to be the way to go for diversification and convenience.
