Real Estate Investment Trusts

Dynex Gets Defensive to Tackle Interest Rate Risk

Dynex Capital, Inc.(NYSE: DX) has lived through more than a few interest rate cycles since it was created in 1988. Lately, the Mortgage REIT has taken a more defensive posture, as the company looks to secure itself against potential volatility caused by Federal Reserve rate hikes and global policy shifts.

Dynex, which is based in Virginia, invests in a portfolio of mortgage-backed securities (MBS) backed by both residential and commercial mortgage loans, 92 percent of which consist of high-rated agency securities, high-rated non-agency securities and interest-only loans on those securities. The rest of its portfolio consists of lower-rated non-agency MBS, as well as below investment-grade MBS, loans and mortgage servicing rights.

AT A GLANCE

Address:
4991 Lake Brook Drive, Suite 100
Glen Allen, VA 23060
Phone: 804.217.5800
Website:dynexcapital.com
Management Team:
Byron L. Boston, President, CEO & Co-CIO
Stephen J. Benedetti, EVP, CFO & COO
Smriti L. Popenoe, EVP & Co-CIO

Doug Harter, an analyst and director with Credit Suisse, says the structure of the company’s portfolio has set up Dynex to weather a rate-related storm.

“Rising [short-term interest] rates is generally a negative for Mortgage REITs,” he says. “Dynex is probably in the middle of the pack of our industry as far as exposure. A lot of the agency mortgage-backed securities they own are hybrid or adjustable-rate mortgages. That will limit their exposure somewhat.”

At the same time, the company has amassed cash to capitalize on any opportunities that crop up as a result of policy shifts.

Defensive Stance

President, CEO and Co-CIO Byron Boston has been with Dynex since 2008, taking over as the chief executive in 2014. His career spans many years in the fixed-income capital markets, including a stint as an MBS bond trader for Credit Suisse First Boston. He worked for Freddie Mac at one point and also founded a Mortgage REIT, Sunset Financial Resources.

Boston says Dynex’s management team takes a methodical approach to risk management and capital allocation. Combined with a rise in financing costs as interest rates have gone up, the company’s cautious stance had a hand in its year-over-year decline of 32 percent in net operating income per common share in the first quarter of 2017, according to Boston.

“The amount of income you are generating is directly related to the amount of risk you want to take and which risk you want to take,” he says. “We have chosen to be a little more cautious from a risk perspective, so we are a bit under-levered.”

“The amount of income you are generating is directly related to the amount of risk you want to take and which risk you want to take.”
– Byron Boston, President, CEO & Co-CIO, Dynex Capital

The company’s strategy has paid off over the long term. Although Dynex’s total returns trailed the FTSE NAREIT Mortgage REIT Index in 2015 and 2016, the company’s 15-year compound annual total return as of June 15 was 10.33 percent. Mortgage REITs produced total returns of 4.45 percent through June 15.

Fallout from Fed Moves

Going forward, Dynex’s performance appears tied to its ability to respond to changes in interest rate policy. The Fed’s three interest rate hikes from 2015 through early 2017 have driven up bond yields. Meanwhile, the moves have already increased Dynex’s financing and hedging costs, cutting into its earnings.

Boston takes prides in Dynex’s dynamic approach towards hedging: “We try to neutralize our portfolio more, but that could change as quickly as tomorrow.” As Eric Hagen, an analyst and assistant vice president with Keefe Bruyette & Woods, New York, notes, hedging involves a trade-off.

“When we model it out, under a smaller move in interest rates, hedges are typically effective. Under a much larger move in interest rates and credit spreads, if they were to correct sharply and unpredictably, that would not bode well,” Hagen says. “The call Mortgage REITs are making is, ‘Do I hedge myself when I think the storm is a thousand miles away? When it is two hundred miles away? When it is five miles away?’”

Monetary policy could also cut into the Dynex’s future earnings and book value as the yields on the 10-year Treasury shift. Additionally, the Federal Reserve will eventually unwind the holdings of MBS and Treasuries acquired as part of its quantitative easing efforts during the financial crisis. Harter expects the sales could widen spreads. In fact, agency spreads are already starting to widen as the Fed has talked about its plans to unwind the holdings. For instance, credit spreads on agency delegating underwriting and servicing (DUS) securities in Dynex’s portfolio have moved up from 59 basis points at the end of 2014 to 67 basis points at the end of the first quarter of 2017.

For his part, Boston is concentrating on the potential opportunities offered by unwinding.

“The Fed reducing their footprint in the mortgage sector will allow more entities such as Dynex to take on the role of managing those assets,” he says. “If they reduce their balance sheets, there’s a need for private capital and expertise in managing these housing-related assets.”

Favorable Factors

There are other offsetting factors working in favor of Dynex at the moment. They include the firm’s low leverage, according to Harter, which should give Dynex room to add debt and take advantage of wider spreads. “You would have a near-term decline followed by a potentially better earnings outlook,” he says. The firm had taken on debt financing at 5.8 times its equity capital at the end of the first quarter, down from 6.3 times at the end of 2016.

The future of Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that play a role in providing home financing, also deserve consideration. President Donald J. Trump has yet to release definitive plans for GSE reform, but cutting back on the involvement of Fannie and Freddie in the mortgage market would add to the need for more private capital. Hence, another potential opportunity for Dynex.

The Trump administration’s moves to roll back regulation of the financial sector could also benefit Mortgage REITs by bringing back banks that had pulled away from the repo business, which is a major source of financing for Dynex. Furthermore, Boston sees potential for Dynex to consider other business strategies if some of the measures in the Dodd-Frank financial system reforms are removed. For example, Dynex cut down its exposure to loans because of stringent consumer protection measures implemented by the Consumer Financial Protection Bureau.

Demographics are also working in Dynex’s favor, according to Boston, given the need for housing in the United States. And Dynex’s yields appeal to investors. The REIT’s first quarter dividend of $0.18 made for an annualized return of about 10 percent.

Boston says he is focused on increasing Dynex’s global presence to gain access to more information. Today, the REIT is maintaining relations with entities that do have such reach. That way, the company can be attuned to factors that could impact the global risk environment.

Overall, Boston says he is working to secure Dynex in the face of the potential for “policy error” from any number of financial actors around the world.
“History is littered with government officials who made policy errors and created havoc for the globe as a whole,” he cautions. “That’s why we have emphasized highly liquid securities at this point.”

(Why?)

Published at Wed, 26 Jul 2017 14:42:17 +0000

Sustainability Issues Are Important to Real Estate Investors

Talk to executives at REITs and publicly traded real estate companies and they’ll attest that investors want to know more about sustainability. The people who decide how major funds make their real estate allocations are inquiring about everything from energy usage to employee diversity to wellness programs.

REIT magazine spoke with the heads of three institutional funds for input on how environmental, social and governance issues impact their investment decisions.

REIT: How does ESG play a role in your investment decisions, if at all? 

Mary Hogan-Preusse: I believe that ESG considerations are an essential component of the investing picture. I believe that talented management is a strong determinant of a stock’s long-term success, and I find that the best management teams do focus on ESG considerations because it’s the right thing to do.

Laura Craft: We value a REIT’s underlying real estate portfolio, and then we assess the REIT as an enterprise. On the portfolio valuation, we recognize that ESG projects can affect a REIT’s cash flow, as they result in higher revenue or lower operating expenses. The REIT enterprise is also valued, taking into account the enterprise’s management and ESG activities; discounts or premiums are applied to determine the value of the REIT.

ESG is a consideration for all of our investments, whether we first identify a REIT with a strong sustainability program or whether we identify a potential investment and then consider its sustainability program.

Beth Richtman: CalPERS’ real assets program has a set of sustainable investments practice guidelines. They form our approach to identifying, monitoring and managing ESG-related risks that may impact the performance of the investments.

When we consider investing in a real estate manager, we study their policies and practices. We factor those into a score we give managers.

At the asset level, we’ve developed a proprietary ESG consideration matrix that our real estate managers will be asked to use when underwriting real estate assets for CalPERS’ portfolio. This tool includes factors like climate change, resource scarcity, water risk, biodiversity, wellness. The goal is to ensure that these types of ESG factors are thought about before we buy an asset and that the costs and opportunities related to  those ESG factors are baked into the financial model.

REIT: Which elements within ESG are you focused on for a company? Do some carry more weight than others? 

Richtman: They may vary by asset type and location. In some areas, climate change risk is going to be more important to focus on than in other areas.

Energy efficiency is often low-hanging fruit with quite positive returns. We’re in year one of an energy-optimization initiative, through which we’re looking for opportunities in our assets related to energy demand, use and production. Overall, we want to know that the companies and managers underwriting the assets are identifying the relevant material risks and opportunities and factoring them into their asset selection and business strategy.

We want to be invested with managers and companies that are responding to tenant markets that increasingly demand or expect sustainability. 

Hogan-Preusse: I focus on all of them. I think about the “E,” the environmental component, in a couple of different ways. I expect a larger company with core-type assets to demonstrate a commitment to sustainability. I believe that for these companies, their size and scale makes the process of demonstrating sustainability metrics easier than for smaller companies, and in many instances I think that their target tenants demand some evidence of a commitment to sustainability from their landlords.

For smaller companies, I do understand that it may be difficult to provide evidence of industry standard measurements, but I expect them to be able to have the conversation and demonstrate in other ways their commitment to environmental stability.

Craft: Governance issues are the most relevant to REITs and have the greatest impact on our valuations.

As shareholders, we are part owners of the firm and we need to understand how management teams and boards have structured the company to ensure alignment of interests with us. Furthermore, high governance ratings could link to leadership on environmental and social factors. 

Beyond the REIT enterprise, environmental activities in the underlying real estate portfolio are also a focus to understand if environmental opportunities have been identified and implemented. 

REIT: What about social and governance factors?

Hogan-Preusse: Since I focus on REITs and public real estate companies, there is an element of self-selection. Many social concerns seen in other industries (weapons, land mines, animal welfare) generally do not apply. Social metrics that I examine include ethical issues such as diversity—inclusivity, really—at the corporate and board levels and certain labor-related issues.

“G”—governance—I examine issues including the quality of management, the quality and composition of the board, and executive compensation. I think that the relationship between management and boards and between management and employees is an extremely important concern, but one that is hard to measure.

REIT: What data and tools do you use for your analysis? 

Hogan-Preusse: Lots of things, including data provided by companies and published by GRESB, company information and proxies, the sustainability section of their web sites (everyone should have these) and management interviews.

Richtman: We’re currently rolling out GRESB across our real assets portfolio – just this year we started asking our real estate managers to fill it out.

For our global equity portfolio which holds our REITs, we are using MSCI’s ESG Manager Tool which provides reports and letter grades for REITs.

Craft: Our own analysts and portfolio managers incorporate ESG analysis as part of their normal research process to identify any ESG-related issues or initiatives that might affect a company’s valuation. We rely on a REIT’s financial filings, augmented by our own primary research conducted by touring properties and meeting with management teams.

Some REITs produce detailed sustainability reports, quantifying what they are doing on the ESG front, backed with data to quantify the cost and impact of ESG efforts. Such disclosure is helpful.

We do subscribe to third-party ESG data sources, which pull in information from various public or private data inputs. However, an overall ESG rating can be confusing and misleading if taken out of context. This is where a company’s sustainability report can become an important avenue for identifying material ESG factors and quantifying ESG activities and impacts. 

REIT: Do you think we’re approaching an investing world that identifies consistent methodologies for collecting and analyzing ESG data for decision making?

Hogan-Preusse: Not yet.

Craft: The industry is moving closer to consistent methods but it still has a ways to go. ESG ratings vary in approach, materiality, weighting and comprehensiveness. Additionally, the REITs themselves vary in geographic location, property type, operational control, and portfolio composition. As a result, ESG data sets need to be taken in context.  

Richtman: I think the industry has come a long way in terms of terms tracking and reporting. However, I imagine that sustainability officers at REITs must be somewhat overwhelmed by as many surveys as they currently have to fill out; over time hopefully reporting requirements can be streamlined to be useful to investors, consistent and not overly burdensome.

One particular area that I hope improves is climate risk to assets. I don’t think there’s currently a great tool for investors yet. My dream tool would be a ZIP code scenario analysis showing the physical risk, resiliency of the surrounding infrastructure, and estimating climate change related tax and insurance risks for a particular asset or portfolio.

REIT: How does sustainability impact your fundraising efforts? 

Craft: The frequency of investor questions about how we incorporate ESG into our investment process is increasing. Right now, investors are most interested in knowing that we are monitoring ESG efforts and impacts as part of our valuation process, rather than specifying ESG-related terms or fund attributes.

REIT: Do you see any opportunities for REITs and/or REIT investment managers to help educate source capital in this area?

Craft: Definitely. Investors never want to feel left behind, so as the awareness of ESG continues to grow, opportunities to educate investors on its importance will expand accordingly.

Richtman: One thing that would be useful is to provide data and participate in studies about what ESG practices are economically beneficial. It’s great as an investor to read about greenhouse gas reductions or decreased energy use, but it gets a little bit more exciting when we learn about how much money was saved or how it might improve the type of returns.

Kilroy Realty Corp. (NYSE: KRC) uses SASB’s standards in its 10-K, which is a great example of a REIT educating the market. It elevated their sustainability efforts by showing they’re material to their business.

Hogan-Preusse: I think NAREIT has done an excellent job of publicizing and monitoring this issue through its Leader in the Light program. The GRESB survey provides a helpful yardstick for comparing companies, which will only get better over time as the survey is further refined and we have more years of data to compare.

Because the public real estate industry is so transparent and was a relatively early adopter of ESG initiatives, I think that a REIT fund whose investments all demonstrate strong commitments and performance on ESG initiatives and metrics would be a welcome investment choice for pension funds and other socially responsible investors.

REIT: What can REITs do better to improve the quality of their ESG data?

Craft: REITs need to set clear boundaries on the areas that they can and can’t control. REITs can understand their portfolio exposure and annual average loss (AAL) ascribed from insurance on their geographic environmental risks, quantify the percentage of the portfolio that they have operation control over and pay utilities on, report on the sustainability ROI projects, highlight innovative technologies and practices, and give insight into activities taken that increase occupier retention.

REITs have limited control over occupant behavior and operations and usage of their rented space, including utility consumption. In many cases, REITs will not have access to occupants’ utility information, as occupants will pay utility companies directly for their usage. REITs should not spend considerable amounts of time tracking data that they do not control and pay the bills for; REITs should focus time and efforts on controllable data and operations.

Richtman: It’s helpful to not only get a snapshot of where a company is today, but also where it’s going. How are they looking at risks and opportunities related to ESG? Most importantly, what are they doing about them?

REIT: What do you recommend for REITs that are just starting a sustainability program or trying to revamp their strategy? 

Richtman: Research what other real estate managers are doing. I’d consider hiring a consultant or staff with expertise in this area. 

Hogan-Preusse: My best advice is also one of my favorite sayings: “Do not let the perfect be the enemy of the good.” I know that extensive surveys like GRESB can be daunting for smaller companies. Additionally, many companies are not ready to make the commitment to check every box in terms of what it takes to achieve best-in-class social and governance standards.

Something is better than nothing. Post something on your website demonstrating your commitment to sustainability in smaller ways, from recycling to development standards to environmentally friendly transportation opportunities.

Even if you “can’t find the right people to improve diversity at your organization,” why don’t you focus on finding just one? Trust me, you can find one person. Even better, how about establishing a mentoring or training program to create future leaders who will fulfill these criteria?

Address governance concerns that investors are posing to you head on, and be as transparent as possible.

Craft: Focus on improving the ESG factors and initiatives that will improve portfolio performance and publicly disclose sustainability efforts and projects with quantifiable numbers.

Public disclosure will help in the passive ESG ratings and in valuing a REIT. As an REIT investor, we are always trying to derive a better valuation for each company, so the more companies can disclose on ESG issues the better. 

(Why?)

Published at Wed, 26 Jul 2017 15:26:28 +0000

4 Quick Questions with Sander Paul van Tongeren, Managing Director of GRESB

How has the scope of GRESB changed over time?

Since 2009, GRESB has expanded its real estate coverage beyond private equity firms to include many U.S.-based REITs and a growing group of listed property companies globally. We continue to experience a strong uptick in REIT participation as the industry seeks to benchmark ESG best practices against its peers.

I’m excited about two areas of growing interest. First, the GRESB Infrastructure Assessment launched in 2016, which broadened our ESG coverage to include all real asset classes. Secondly, the GRESB Debt Assessment covers the full real estate capital stack. This ESG engagement framework is relevant to the Mortgage REITs that are part of NAREIT.

For the first time, GRESB has set participation targets for 2017. Why is now the right time to set such goals?

During GRESB’s early years, our focus was to improve the GRESB assessments, invest in technology and streamline the annual data collection process. The GRESB portal is now state of the art, industry engagement is strong at nearly 60 percent of global REITs by market capitalization and our data validation process is robust.

GRESB has become the global standard with $2.8 trillion of real estate companies and funds benchmarked using the GRESB Real Estate Assessment in 2016. We anticipate our first Canadian REIT participants in 2017 and see additional interest in Latin America.

What are some of the other initiatives we can expect to see from GRESB in the near future?

The GRESB team is working on three near-term initiatives. This year, we are releasing the GRESB Public Disclosure Level, a new feature providing investors with insights not captured in the real estate assessment data.

Importantly, the level includes companies participating in the GRESB real estate assessment as well as the roughly 200 listed property companies yet to report.

We are also moving towards a GRESB assessment process that is less year-specific, removing pressure for participants to report during a three-month time window. We will introduce this new streamlined functionality in the second half of 2017, allowing REITs to update their information anytime throughout the year.

North American companies and funds continue to lag their global counterparts. Do you see this changing anytime soon?

It’s clear from the five-year trend that the U.S. market continues to improve its ESG performance. On a regional basis, U.S. REITs outperform U.S. private equity funds in terms of ESG performance by a significant margin.

By comparison, Australia receives accolades for its sustainability leadership, as they should. ESG permeates their financial sector, and being centralized in Sydney provides certain synergies and knowledge-sharing advantages. But, the U.S. has certain structural advantages, including a very strong economy with competent and equally competitive professionals.

With NAREIT Leader in the Light Award winners leading the way, one can look toward the GRESB 2020 results as a time when certain property subsectors of North America could overtake their Australian counterparts.

Sander Paul van Tongeren is managing director and co-founder of Amsterdam-based GRESB, an investor-driven organization committed to assessing the environmental, social and governance (ESG) performance of real assets globally, including real estate portfolios, real estate debt and infrastructure.

(Why?)

Published at Tue, 25 Jul 2017 15:14:31 +0000

One-on-One with Equity Residential CEO David Neithercut

David Neithercut, CEO of Equity Residential(NYSE: EQR), says the company’s mission of providing residents a “great place to live” in the country’s most interesting and dynamic cities creates a sense of excitement that can be felt throughout the entire organization.

“From the top of the house to the bottom, we all understand that goal, and we all love what we do,” Neithercut says. 

Neithercut joined Equity Residential Founder and Chairman Sam Zell’s Equity Group Investments in 1990 and later became CFO of Equity Residential shortly after it went public in 1993. He was named Equity Residential’s president and CEO in 2006. Within eight years of its initial public offering, Equity Residential became the first apartment REIT to be listed in the S&P 500. The company has also been recognized numerous times by Fortune magazine as one of the world’s most admired companies in the real estate sector under Neithercut’s watch, and he has been recognized several times in Institutional Investor magazine’s surveys as one of the best REIT CEOs.

Neithercut also presided over Equity Residential’s most significant acquisition to date following a multi-year pursuit and the receipt of a $150 million break-up fee – the $9 billion purchase of 60 percent of the Archstone apartment portfolio from Lehman Brothers Holdings Inc. in 2013. The deal allowed the company to significantly accelerate its long-term strategic goal of focusing on high-density, urban assets.

Neithercut, a former NAREIT chair, recently spoke with REIT magazine about some of the factors behind Equity Residential’s achievements, the current outlook for the multifamily industry and the importance of having passion for your work.

REIT: What characteristics do you value most in the management team you have established at Equity Residential?

DAVID NEITHERCUT:  I strongly believe that we all share a sense of a common purpose. At the executive committee level, I know that we are very much aligned on everything. Our compensation program is one that has shared goals. No individual does well unless everyone else does well, so I really think that’s very important.

Up Close

Age: 61
Education: BA, St. Lawrence University; MBA, Columbia University
Family: Wife of 35 years, Suzu; Daughter, Emiko, 31; Son, Ben, 30
Hobbies: Skiing, cycling and sailing
Favorite vacation spot: Northern Michigan
Favorite film: “The Godfather”
Recently read: “The River of Doubt: Theodore Roosevelt’s Darkest Journey”
Professional/community activities: Board of LINK Unlimited Scholars; Board of Lurie Children’s Hospital; Advisory Board of the Joint Center of Housing Studies at Harvard University; past NAREIT Chair; and the MBA Real Estate Program at Columbia University

The culture of the company runs really deep. It started with the culture Sam Zell instilled in Equity Group Investments and 24 years later we still really embrace it. You either live it or you decide to work somewhere else. It’s not uncommon for people who leave here to come back because they didn’t appreciate how important culture is to an organization. 

REIT: What is your proudest achievement during your 11-year tenure as CEO?

NEITHERCUT:  Looking back, I think that the single most important thing we’ve achieved as an organization is the total transformation of our portfolio from one that used to exist in 50 markets and substantially comprised suburban, garden apartments to one now that is focused on high-density, coastal urban and highly walkable close-in suburban markets. That’s been a big change.

Our portfolio today has the highest walk scores in the public (apartment) space. As we continue to think about the jobs our economy is going to create going forward and where those jobs will be located, and as we think about the continued re-urbanization of the country, we are really excited about the repositioning we’ve done and where we are located today and for the future.

REIT:  EQR has been actively disposing of non-core assets. What impact has the sale of close to $7 billion in properties in 2016 had on the company?

NEITHERCUT:  It was really the grand finale that was needed to exit what we recognized were not going to be our long-term markets and to finally have our portfolio 100 percent in these coastal gateway markets. It wasn’t easy to part with that much capital but it was the right thing to do for our shareholders and the timing was close to perfect.

REIT: The past decade has been a particularly strong one for the multifamily sector by almost any measure of fundamentals. Is it now heading into a more sustainable, long-term level of growth?

NEITHERCUT:  We clearly had a terrific run coming out of the great recession. The economy was improving, we had incredibly favorable demographics and very little new supply had been built. We had a three or four year run that was about as good as any of us had ever seen in the multifamily space.

Today, while the demand characteristics remain very strong, we do have more supply in these markets so things have softened a little bit. We think that supply is going to peak this year and will begin to moderate in 2018 and beyond.

That said, we think we’ll continue to have a very favorable run ahead of us. The demographic picture remains strong. Within the millennial generation, the single largest age group of that segment is only 25 or 26 years old. The median age of our resident today is 34. We see this segment of the population continuing to be interested in living in high-density cities, attracted to the jobs that are being created by our knowledge-based economy. We see them marrying and having children later in life and really embracing the flexibility and optionality that rental housing provides in these great cities.

We’ve taken a little bit of a pause this year as a result of the new supply. We’ve seen a moderation in our revenue growth, and while I’m not suggesting we’ll get back to where we were in 2012 or 2013, I see no reason why we won’t very soon get back to revenue growth levels that are above long-term historical trends.

REIT: You have said that the focus in 2017 is on retaining residents. What steps is EQR taking to achieve that and how are the results looking so far?

NEITHERCUT: It’s really about service, service and service—making sure we’ve satisfied our existing residents. Most of our employees work on-site, taking care of our residents and so it’s really a top-to-bottom focus. It’s about providing remarkable service to get them to renew with us when their leases expire and hopefully extend their stay with us and say good things about us to their family and friends and to encourage more people to live with us.

We’re also spending some more capital this year on customer-facing projects like lobbies, health clubs and common areas to make our properties competitive in this more challenging market. We’re very pleased that our retention rate has improved this year, at least through the first quarter compared to a year ago. It seems like everything we’re doing is working.

REIT: How hard is it to distinguish between short-lived fads in the multifamily business and trends that have actual sticking power?

NEITHERCUT: When you are investing massive amounts of capital and building these assets, one has to be very cautious about short-term trends. We’re building long-lived assets, and we need to be more focused on long-lived trends. One reason we like the high-density urban market is that we think that those markets will be in great demand for a long time.

Short-term fads can be very value destructive. People are doing a lot of purpose-built housing today, which is something we’ve stayed away from. You hear about WeWork and now WeLive and those are fads where we have no idea how long they may last. We are really focused on these highly-walkable locations in gateway cities that we believe are going to attract any demographic. While we have a lot of millennials, 20 percent of our units are occupied by those 50 and older.

There’s no asset we own that is specifically targeting one demographic or another. We buy well-located properties that will appeal to every demographic in the spectrum interested in living in a high-density, walkable environment.

REIT: One trend that seems to have staying power is a shift to smaller apartments and more communal living. How has that played a role for your company?

NEITHERCUT: Indeed, we have units that are as small as 225 square feet. Residents don’t actually live in those units. When they are not at work, which for many is 12 to 15 hours a day, they’re in the coffee shops, bars, restaurants, health clubs and parks. They sleep in these units, store their belongings there, but they live in the city, on the rooftop, in the media room. It was a real awakening when I showed these units to my board and they realized that their idea of living in a unit is much different than that of a young, single person enjoying the big city.

The smaller units are a function of the high cost of housing in these markets. It doesn’t make any sense to build a huge unit because it costs the same amount per square foot and would require rent that most people are unwilling to pay. It’s an economic reality of life in the big city. 

REIT: Equity Residential has been singled out for its sustainability achievements by GRESB and NAREIT. Where do sustainability and corporate responsibility fit within the overall strategy of the company?

NEITHERCUT: Sustainability, corporate social responsibility, diversity and our employee’s total well-being—their personal, financial, career, social and community well-being—are all part of our core values. Adherence to these values is one of the shared goals of our senior management team. As to sustainability, we’re really focused on a people, planet, profits approach and that has served us well.

There was a time when putting LED lights in a property didn’t make sense because of the cost. When those lights came down in price and it made economic sense, we hit it really hard.  Today, we’ve got solar panels on most of our properties that have swimming pools to help heat them. For some time, we’ve used co-generation systems at several assets in Manhattan in order to decrease our use of grid power. We’re also very conscious about water conservation and have numerous programs that have produced incredible reductions in our water usage. We’re very pleased that all those efforts have been recognized as that of a global leader in sustainability.

REIT: As an advisor to the Columbia Business School MBA real estate program, what traits do you think are important for the next generation of leaders?

NEITHERCUT:  Putting aside real estate, you need a passion for whatever you want to do. I think you have to be curious, you have to have a desire to always be learning—that’s a very important trait. Today, you’ve also got to be agile. You need to be comfortable with change; you need to embrace it and can’t be afraid of it. If you are, I don’t think you’re going to go terribly far.

You also need to be able to work with diverse teams in a highly collaborative environment. If you’ve got passion and you’re curious and you’re agile and you’ve got an ability to work with teams, I think you can be successful in whatever it is you want to do. 

Neithercut emphasizes the importance of corporate culture, and believes it is important that his executive team shares a common purpose. Pictured left to right: Bruce Strohm, EVP, general counsel and corporate secretary; Mark Parrell, EVP and CFO; Neithercut; Alan George, EVP and CIO; Christa Sorenson, EVP of human resources; and David Santee, EVP and COO. 

(Why?)

Published at Tue, 25 Jul 2017 15:44:13 +0000

REIT Sustainability Initiatives Reach New Heights

Will Teichman led the formation of the sustainability program at shopping center REIT Kimco Realty Corp. (NYSE: KIM), and he says his experience has proved to him that “sustainability is here to stay.”

“It’s becoming institutionalized in the business, and that’s a great thing,” says Teichman, a senior director of strategic operations with Kimco Realty.

However, as sustainability planning has become embedded in the day-to-day operations of REITs, companies have moved beyond the implementation stages and are looking for new and better processes and technologies. 

While returns on investment from such efforts are still being researched and quantified, stakeholders from the executive suite to tenants agree that being proactive is worthwhile.

“Our environmental challenges are becoming clear as they unfold,” says Michael Mendelsohn, senior director of project finance and capital markets at the Solar Energy Industries Association, which is developing outreach materials for commercial real estate operators interested in solar power that should be completed later this year. “A lot of it is very real and very present. People and businesses want to do something now if they can and be part of the solution, rather than just ignoring it.”

Here are four examples of ways that REITs are trying to take their sustainability efforts to the next level.

Green Lease Lessons

A green lease sets the parameters for tenants’ use of resources. These align landlords and tenants so that they both benefit from eco-friendly measures and are now being used by many REITs.

“Green leasing falls squarely in the realm of what’s next for leading landlords and tenants,” Teichman says.

8,500 occupied tenant spaces in Kimco’s portfolio

Consider water usage. Previously, costs associated with shared water lines would be divvied up based on square footage. A heavy water user such as a restaurant would benefit, while a shoe retailer that used less water might end up paying more than its share. Such a system provides little capacity for tenants to monitor usage – and can even stir resentment from those who feel they’re paying for something they do not use. Simply, tenants see little incentive to conserve. 

Kimco Realty opted for individual metering for tenant water usage. The shopping center REIT has found that the upfront cost investment actually pays back over the long term via reduced consumption and outstanding receivables. Now, the majority of existing and new tenants have been individually metered, drastically reducing payment disputes and helping tenants to use this natural resource more wisely.

Many green leases implement a green standard for construction work. At Kimco Realty, the base version specifies low- and no-cost material and process improvements, such as paints with low levels of volatile organic compounds. A premium version costs more for additional energy efficiency improvements, which are designed to pay back in reduced energy bills during a typical five-year lease term, according to Teichman. 

Green leases don’t require a dramatic revamp of the existing form. The key, Teichman says, is targeting incremental improvements. Most commercial leases already contain language that can be tweaked to encourage sustainability. “Look at key sections – such as utilities, common-area maintenance and construction-work exhibits – and try to identify ways in which you can incrementally improve upon form language,” he advises. 

Solar Power Push

Energy bills take a big bite out of everyone’s monthly budget. While cost-conscious home owners can turn out the lights, mall owners know retailers and shoppers need bright spaces.

Enter solar power. Although solar technologies require an upfront investment, mall operators, which have plenty of available rooftop space, can use them to protect against utility-price spikes. 

31 megawatts of capacity generated by GGP across 31 properties

In late 2012, GGP Inc. (NYSE: GGP) invested in solar power for four properties in New Jersey and its Ala Moana Center in Hawaii, one of the world’s largest outdoor shopping centers. The instillations power the supersized mall’s common areas and fuel about 11 percent of the Ala Moana’s total electricity demand, says Brian Montague, senior vice president, energy and sustainability at GGP.

The solar power installations provided greater cost savings than expected, so GGP kept going: By the end of 2016, the company had roughly 31 megawatts of capacity installed across 31 properties.

Investors have benefitted as utility expenses declined, according to Montague, adding that the energy conservation efforts and associated reduction in expense are accretive to net operating income and funds from operations. Such investments have yielded “double-digit returns to our investors, while at the same time upgrading the infrastructure of our centers,” he says.

That’s why GGP says its solar push will continue. This year, the Chicago-based company is on track to add an additional 25 megawatts, with 15 more megawatts anticipated in 2018. That could place GGP within the top five or six producers of solar power among facility owners. 

For anyone looking to pursue the idea, Montague says it is vital to truly understand the impact of the load generating via solar power.

“Each respective utility may value and integrate your generation into your utility billings differently,” he pointed out. “Understand your current tariff as well as other optional tariffs to determine the rate structure that allows you to maximize the value of your generation.”

Fuel Cell Savings

Solar power isn’t the only renewable source REITs turn to keep the lights on and avoid tapping old-fashioned (and overworked) power systems. Fuel cells appeal to real estate companies because they produce clean, reliable energy with reduced carbon emissions.

$2.4M Amount of savings Macerich Generates Annually by using fuel cells

Retail REIT Macerich, Inc. (NYSE: MAC) is working toward the ambitious “Innovating to Zero” milestone with an objective of generating no energy waste emissions, water waste or landfill impact, says Jeff Bedell, the company’s vice president of sustainability. In 2013, Macerich launched its first fuel cell project in Danbury, Connecticut. It yields 750 kilowatts of power that combine with a bigger solar-power system to provide nearly half of a single mall’s power. Pleased with the results, Macerich is finishing an initial implementation phase that includes five properties in California, New York and New Jersey. The fuel cells will produce a total of more than 3.5 megawatts of electricity to more than double current renewable and clean power production. Estimates show they will save more than $2.4 million in annual energy costs.

The overall project is expected to be completed in August, according to Bedell. He adds that another phase that could total five additional megawatts of production is being explored. 

Since 2008, energy-efficiency improvements have saved Macerich 225 million kilowatt hours in electricity usage and more than $30 million in operational costs. To be sure, this isn’t an easy move. Companies should start with the economics and financing structures that will work, suggests Bedell, noting: “These are large capital costs, and when you consider the complexity of taking advantage of potential federal tax credits and local incentives, along with modeling the operating costs and savings, this needs some strong financial expertise behind it.”

Sweating Smaller Stuff

When it comes to sustainability, a combination of measures can yield huge results. Plenty of REITs are finding success just by looking inside their boxes for areas to improve. 

That’s how Ventas(NYSE: VTR), which owns nearly 1,300 senior housing and health care properties across the United States, Canada and the United Kingdom, is reducing its carbon footprint and enhancing efficiencies, says Kelly Meissner, the health care REIT’s director of sustainability.

35% amount energy efficient bulbs will reduce usage

The Chicago-based company has prioritized lighting retrofits, swapping out thousands of lights with more efficient bulbs that can reduce electricity usage by 35 percent to 80 percent. Ventas has completed efficient lighting retrofits at more than 150 properties, and the health care REIT expects to complete dozens more in 2017 that will primarily be LEDs. 

Ventas says it is also taking a systematic approach to identifying energy efficiencies in its medical office building portfolio through its Lillibridge subsidiary, which conducts retrocommissioning studies on a portion of its portfolio every year. These studies evaluate the building’s mechanical and control systems to identify opportunities to reduce energy consumption and produce long-term operational efficiencies to lower costs. In 2016, Ventas spent $3 million at more than 40 facilities based on study results. Improvements included controls upgrades, the addition of building-automation systems and HVAC equipment upgrades.

Ventas expects to spend a similar amount in 2017 at another 40 buildings. It also has about $500 million in active LEED development and redevelopment projects, demonstrating that the sustainability mission applies to the old and new. 

Within the next decade, Ventas is on track to cut energy and greenhouse gas emissions by 10 percent, water usage by 5 percent and waste sent to landfills by 4 percent. Meissner is working to aggregate the REIT’s utility data on a centralized platform, providing better visibility into usage. That way, “we can determine the best way to minimize that impact, while also lowering utility costs,” she says. 

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Published at Tue, 25 Jul 2017 14:11:15 +0000

The Evolution of Sustainability in the REIT Industry

By its very nature, the real estate business has a significant environmental footprint. As long-term owners and investors, REITs and publicly traded real estate companies are well aware of the enduring impact of their strategies and operations. Our industry has consequently made the importance of ecofriendly practices and policies an article of faith.

However, the concept of sustainability has evolved over time to refer to more than what is commonly associated with “being green”—utilizing clean energy, minimizing waste and other environmentally conscious principles. Sustainability now includes the social and governance matters that are receiving a growing amount of attention from boards of directors, investors, equity analysts, the media and other stakeholders.

Many of the companies mentioned in this sustainability-themed issue of REIT magazine have robust environmental programs. Yet, this edition also shines a light on the “S” and “G” of ESG.

For example, the feature “Well Rounded” examines the ways in which REITs are formalizing and refining their social and governance initiatives in the never-ending process of building more effective sustainability platforms. That article includes a sidebar on NAREIT’s efforts to promote the greater involvement of women in REITs and real estate investment. In “Green Capital,” institutional investment managers discuss what they are looking for regarding how companies approach all three planks of ESG.

At AvalonBay, we seek out ways to help provide the locales in which we operate with a better way of life by creating durable, mutually beneficial partnerships. That means devoting our resources to philanthropy and initiatives that will have lasting, positive effects on the surrounding communities, including community preparedness and disaster relief, affordable housing and support for the disadvantaged.

On the governance side, we abide by the best practices and principles that have bolstered the REIT industry’s overall reputation for transparency. We also publish an annual corporate responsibility report that documents our performance and establishes goals to drive short- and long-term strategies. This report not only helps explain AvalonBay’s sustainability objectives, but also gives stakeholders a means to hold the company accountable.

Our experience developing and fine-tuning an effective ESG program is no different from those of other REITs and real estate companies. The guiding tenets of sustainability are growing more rigorous for all of us. Meanwhile, stakeholders have appropriately increased their expectations for how companies address pertinent issues.

The REIT approach to real estate investment welcomes the scrutiny of the public markets, which all but assures that our companies can’t fall short of those expectations. Living up to them will require an ongoing commitment to a well-rounded sustainability program.

Tim Naughton
Chairman & CEO
AvalonBay Communities, Inc.

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Published at Mon, 24 Jul 2017 18:11:48 +0000

Equinix: A Giant Behind the Scenes of the Digital Age

Equinix, Inc.(NASDAQ: EQIX) President and CEO, Stephen Smith presides over a company of which many people haven’t heard. He has even lost count as to how many times his firm has been confused for the high-end health club chain Equinox.

Yet, Smith maintains a sense of humor about such mix-ups, and it’s not hard to see why he can afford to chuckle. Equinix isn’t a household name yet, but it’s a giant of the digital age.

Based in Redwood City, California, Equinix is the world’s largest data center company, with revenues of $3.6 billion last year and a $33 billion market cap in April. It has nearly 180 centers in 44 major markets in 22 countries and rents server space to 9,500 different customers—including the world’s largest networks, cloud computing platforms and business enterprises. An estimated 70 to 80 percent of the world’s internet traffic passes through servers renting space in its data centers daily. When you send an email, stream a video on Netflix or post something on LinkedIn, chances are your digital traffic passes through an Equinix center somewhere on the planet.

“The only reason you can download a Netflix video in less than 10 seconds in any city in the world is because Netflix has thousands of servers (renting space) in data centers, many of them Equinix centers,” explains Smith, a former tech-industry executive who took the reins of Equinix in 2007.

As demand for data storage and access continues to skyrocket, Equinix is working to stay at the forefront of tenants’ need for server space.

Early Mover Advantage

Equinix got its start during what has been described as the internet gold rush of the late 1990s. Founded in 1998 by Jay Adelson and the late Al Avery, two facilities managers at the former Digital Equipment Corp., Equinix developed some of the first data centers in the country. The centers served as connection points for networks forming the early internet.

“In the late ‘90s, the internet was just scaling around the world. The biggest [telecommunications companies] in the United States got together and said, ‘We need central connection points to exchange traffic,’” explains Smith, adding that Equinix was chosen to develop centers in six markets for the carriers. “All those carriers fibered into these very first data centers, and that’s what got the game started. They exchanged traffic [in these centers], and that’s what helped to scale the internet in the United States,” he said.

Equinix went public in 2000 and began operating as a REIT in 2015. Smith and his predecessor, Peter Van Camp, now the firm’s executive chairman, work together closely.

“Their DNA comes from the tech world,” said RBC analyst Jonathan Atkin, referring to the company’s management team.

Betting Big

In the last 18 years, Equinix has spent some $10 billion on acquisitions to keep up with the growing demand for data centers.

Data consumption has surged in recent years for a variety of reasons, from the proliferation of smartphones to the rise of cloud computing. The growing adoption of cloud computing, which Smith considers the next technology paradigm shift, is expected to result in a doubling of the size of the data center industry by 2021, according to a report by Jones Lang LaSalle.

Cisco estimates that internet traffic will grow at a 23 percent compound annual rate through 2019. By then, total traffic will be equivalent to 66 times the volume of internet traffic in 2005.

“Our job is to design, construct and run data centers with other people’s equipment in them. Companies come in to our centers to connect to the networks, cloud [platforms] and to each other. The real secret sauce of our type of data centers is interconnection.” –Stephen Smith, President and CEO, Equinix

“You don’t need to be a techie to know that 10 years ago we had Nokia phones, and now we are using iPhones and iPads, along with our computers,” says Lukas Hartwich, a senior analyst at Green Street Advisors.

“The proliferation of computing devices that permeates every aspect of our lives creates demand for data, software and services. Cloud computing has also been a big tailwind for the data center sector,” he adds.

Since its founding, Equinix has undertaken 18 acquisitions, several of them transformational, to increase its ownership of the land and buildings that it operates. In 2010, it bought its closest U.S.-based rival, Switch & Data Facilities Co. Last year, it closed its largest-ever acquisition, the $3.8 billion purchase of its closest competitor in Europe, the former TelecityGroup.

The Secret Sauce

Today, Equinix is also the biggest player in the so-called retail co-location space.

A retail co-location center has multiple tenants, and they lease space for their equipment in flexible increments: by the rack or partial rack/cabinet, usually. Wholesale co-location centers, on the other hand, have many fewer tenants that lease larger blocks of space.

Co-location is an appealing option for companies that want to avoid the huge costs associated with building and maintaining their own data centers. Some large firms have their own data centers and lease space in co-location centers.

Another advantage to co-location is the ability to digitally interconnect with other tenants  in the same center or campus. Here’s where Equinix really shines, according to Smith. Its tenants include more than 1,500 networks and some 2,750 cloud and IT service providers, including platforms run by Amazon, Microsoft, Google, IBM and Cisco. The company has thousands of other big-name tenants—content providers (such as eBay, Direct TV, Hulu and Netflix), financial firms (including Bloomberg and the Nasdaq stock exchange) and business enterprises, from Anheuser-Busch to Chevron.

Over the last several years, Equinix has signed on more than a quarter of Forbes Global 2000 companies and more than a third of Fortune 500 companies. It’s adding nearly 200 new business-enterprise tenants per quarter.

“Companies come in to our centers to connect to the networks, cloud [platforms] and to each other. The real secret sauce of our type of data centers is interconnection,” Smith notes.

Tenants pay for space, power and interconnections—either one-to-one or one-to-many connections. More than 15 percent of the company’s revenue is based on interconnection. There are 237,000 “fiber cross connects” among its tenants, and Equinix is adding about 7,000 new cross connects per quarter.

“What separates Equinix [from other data center providers] is its interconnection-oriented focus,” says Cowen analyst Colby Synesael. “It has ‘magnet’ customers” that draw other firms to Equinix centers in search of connectivity, he explains.

The World Is Flat and Interconnected

What also separates Equinix from most of its peers is its global footprint. The company owns data centers on five continents and has some 6,000 employees, including teams on the ground in each of its country markets.

Equinix has spent more than a billion dollars a year during the last five years to develop new centers and add capacity to existing campuses. This year, it plans to spend another $1.2 billion on such projects.

In May, the company closed one of its largest-ever acquisitions, a $3.6 billion deal to buy 29 data centers from Verizon. The deal strengthened Equinix’s hand in 12 of its existing markets and gave it a presence in three new markets: Bogotá, Columbia; Culpeper, Virginia; and Houston.

As part of the deal, Equinix acquired a crown jewel: a 750,000-square-foot facility in Miami that is one of the world’s largest data centers and a critical gateway to Latin America. The so-called Network Access Point of the Americas hosts the termination points of 15 sub-sea cable systems and more than 120 global networks connecting to about 150 countries. Latin America is one of several emerging markets in which demand for data centers is expected to soar in the coming years, owing to expanding internet access.

Equinix’s vast geographic reach provides one-stop shopping for firms that do business in many different markets. It also allows companies to place their servers near end users worldwide, which results in superior connectivity, according to Equinix.

“In the REIT world, we don’t think there is much in the way of synergies for being a global company. But this is one of the few sectors where that is a benefit,” says Hartwich of Green Street.

Such strategic advantages have translated into strong financial results. The company has had 57 consecutive quarters of top-line growth. Since converting to a REIT in 2015, its adjusted funds from operations have grown by more than 20 percent on a compound annual basis, taking into account guidance for this year.

“I don’t know if there is any tech company in the world that has done that,” says Smith, referring to Equinix’s long streak of quarterly revenue growth.

We’ve Only Just Begun

Despite Equinix’s spectacular growth since Smith took the reins a decade ago, the company is showing no intention of resting on its laurels.

Smith says Equinix intends to stay ahead of the competition by continuing to “build more scale and reach around the world,” among other things.

“There are new emerging markets that the big cloud providers and networks are going to next: places like deeper into India, China, South Korea, the Middle East and deeper into Latin America and West Africa,” Smith explains.

“We will be able to scale this company into emerging markets with some of those big cloud providers,” he adds.

Smith is convinced that we’ve only just begun to see the possibilities when it comes to the web of interconnection between cameras, phones, cars and more that are connected to the cloud. Cisco predicts that 50 billion “things” will be connected to the cloud by the end of the next decade.

Clearly, Equinix has grown up with the internet, but is intent on staying on the leading digital edge.

Global and Green

Data centers have come under public scrutiny in recent years for their environmental impact. The focus of much of that scrutiny is the vast amounts of energy consumed within them to keep the internet humming 24/7. A 2012 study commissioned by The New York Times found that worldwide, data centers use about 30 billion watts of electricity, roughly equivalent to the output of 30 nuclear power plants.

For its part, Equinix has pledged to eventually power its entire network of data centers with 100 percent clean and renewable energy. The company is investing in projects involving wind, fuel cells, solar and other renewable technologies to deliver on its promise.

Equinix’s global reach has allowed it to explore and implement innovative sustainability practices and technologies. The company has also used its considerable clout to encourage energy producers to adopt more sustainable power sources.

Already, the company is using more than 571 million kilowatt-hours of green power annually, which represents 43 percent of its total power needs.

Those accomplishments have not gone unnoticed. Equinix currently ranks 16th on the EPA’s National Top 100 List of the largest green power users and seventh on its Tech & Telecom Green Power Users List. The company also received the 2016 Leader in the Light Award in the Data Centers category.

(Why?)

Published at Mon, 24 Jul 2017 15:10:00 +0000

Moving the Needle: NAREIT’s Dividends Through Diversity Initiative

If you look at my picture above, I may seem like an unlikely candidate to write a column about the importance of diversity in the commercial real estate industry. Outside of being follicly challenged, there is nothing in my genes that qualifies me to speak on any minority group’s behalf.

But that is exactly why it is so important to do so. I have two daughters whom I happen to think are incredibly bright, creative and full of unlimited potential. Dad bias aside, I can’t imagine seeing them excluded, dismissed or passed over for a job or promotion they truly deserved simply because of their gender.

Because my own father’s job had him away from home more often than not, my mother raised my two older sisters and I essentially on her own while also working a full-time job. She would occasionally have to leave work early or take a day off to take care of a sick kid or go to one of our games. I learned much later that she was routinely passed over for promotions or kept off special projects because she was deemed “unreliable.”

She told me she tried to overcompensate by bringing work home to do when we were asleep or working on the weekends, but the perception was already in place. That was nearly 30 years ago, but even though great strides have been taken, women and other minority groups face many of the same challenges today.

That is the driving force behind NAREIT’s new Dividends Through Diversity Initiative. The initiative’s mission is to promote the recruitment, inclusion and advancement of women and other minority groups in REITs and the broader commercial real estate industry.

Like many industries, real estate has struggled to move the needle regarding diversity at the executive and board level. Increasingly, research studies are showing companies with more diverse boards outperform their peers. In addition, large shareholder groups like State Street Global Advisors have said they would not support companies with non-diverse boards in proxy fights.

NAREIT’s Dividends Through Diversity Initiative, discussed in greater detail in this issue, seeks to help accelerate the industry’s progress by sharing information, providing education and career development, hosting events and offering mentoring opportunities.

The initiative is led by a steering committee of 11 industry veterans and is chaired by CyrusOne(NASDAQ: CONE) CFO Diane Morefield. Having spoken with Diane during REITWeek 2017, I know how important this initiative is to her and the committee. I have no doubt that with everyone’s support, it will be a tremendous success. Here’s hoping that by the time my daughters are in the workforce, the only glass ceilings will be atop their corner offices.

(Why?)

Published at Mon, 24 Jul 2017 13:44:54 +0000

Generalist Investors “Can’t Ignore REITs,” Professor Says

Tim Pire, a professor at Marquette University and the University of Wisconsin-Madison, joined REIT.com for a video interview at REITWeek 2017: NAREIT’s Investor Forum at the New York Hilton Midtown.

Pire, a former managing director and manager at Heitman Real Estate Securities LLC, reflected on the changes in the REIT industry that have occurred during the past 25 years. He noted that REITs have grown in size and sophistication and are now “true corporations that own and operate real estate.”

As for the creation of the Real Estate Sector in the Global Industry Classification Standard (GICS), Pire said the change will have a positive impact in the long term.

“By creating another industry classification, large, generalist investors can’t ignore REITs,” Pire said.

Meanwhile, Pire noted that as he works with students he is emphasizing that REITs represent the “confluence of real estate fundamentals and capital markets.”

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Published at Thu, 20 Jul 2017 18:41:07 +0000

Real Estate Cycle Remains in Growth Phase, Professor Says

Glenn Mueller, professor at the Burns School of Real Estate and Construction Management at the University of Denver, joined REIT.com for a video interview at REITWeek 2017: NAREIT’s Investor Forum at the New York Hilton Midtown.

Mueller said he considers the real estate cycle to still be in a growth phase due to continued, moderate job growth.

“I don’t really want a boom and I don’t think we’re going to get one,” Mueller said.

Another factor supporting the real estate cycle is moderation of supply, except for the apartment segment, according to Mueller. He added that talk of a slowdown in apartment planning and permitting may result in an end to over-supply by 2018 or 2019.

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Published at Thu, 20 Jul 2017 16:46:17 +0000