Equity REITs Provide Best Access to Real Estate Investment, Portfolio Manager Says

Mathew Werner, portfolio manager with Chilton Capital Management, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Werner discussed his view that publicly traded equity REITs are the superior means to invest in commercial real estate.

“First and foremost, liquidity is very important to investors today,” he said. “Secondly, there is very high transparency— the REITs have done a lot of work on their disclosures and what they show in terms of their portfolio and their supplemental financial information. Furthermore is the ability to have a portfolio of REITs that you can diversify by property type, by geography, by risk and strategy as well as tenant. There are low fees; all you have to do is buy a stock like you would any other stock on the New York Stock Exchange or NASDAQ. Probably most importantly is the total returns over time have been higher with the publicly traded equity REITs.”

Werner went on to explain why he thinks investors should be optimistic about the REIT market in the second half of the year.

“We emphasize a long-term view of real estate investing to our clients,” he said. “But looking into the second half of this year, there are opportunities for some guidance increases, based on some numbers that have been reported so far.There are some easy comps for lodging companies and the payout ratio in terms of dividends over AFFO is extremely low right now, so there could be higher dividends going into the second half of the year."

Werne also discussed reasons for potential concern among investors.

“Interest rates would be the biggest reason for concern today,” he said. “Higher interest rates could cause a couple of things that could lead to higher cap rates, which would lower property values. Additionally, this could cause negative fund flows for people who are looking at REITs solely as yield vehicles. Lastly, the goal would be for rents to catch up to interest rates, but there could be a delay between those two items.”