Steven Brown, senior vice president and senior portfolio manager for American Century Investments, was a guest on the latest episode of the REIT Report podcast.
Brown described the landscape for REIT investment today, noting that most REITs issued earnings growth guidance for 2024 of around 4%.
“The REIT earnings outlook still looks very solid,” Brown said. “Demand is better than supply in most property sectors…higher interest rates as well as the higher cost of construction have started to slow supply in many of the markets we invest in. We think the picture is improving for…REIT earnings growth in 2024 and 2025.”
During the interview, Brown also noted that:
- REIT sectors with pricing power today include data centers, senior housing, regional malls, community shopping centers, single family rentals, and manufactured housing.
- Public real estate pricing is more efficient than private. “When we see REITs trading at 10% to 20% discounts to where private market values are, we think that's clearly a green signal for the attractive valuation of public real estate versus private real estate.”
- The M&A theme will continue in 2024 because there are many publicly traded real estate companies still trading at a 15% to 20% discount to NAV versus private market values.
- Completions are likely to start to ratchet down in 2025 and 2026, not because the markets are soft, but because the cost to build has increased so much that the returns are no longer attractive for developers. “That's going to bode well for the earnings setup.”