Fund Manager Still Bullish on Malls, Apartments
11/14/2013
| by
Allen Kenney
Paul Curbo, portfolio manager with Invesco Real Estate, joined REIT.com for a video interview at REITWorld 2013: NAREIT’s Annual Convention for All Things REIT at the San Francisco Marriott Marquis.
Curbo has had a bullish opinion of the regional mall and apartment sectors this year, and it doesn’t sound like that will be changing in the near future.
“We still like both sectors,” he said. “I think they offer a couple different things that are beneficial to a portfolio - one being that they offer above-average growth characteristics over the next several years, so they do trade at discounts to the underlying asset value. I think for the apartment sector, it has been a bit of an underperformer as there has been new construction. That has tended to moderate internal growth. As we move into next year and the upcoming year, I think there will be other sectors that will also be experiencing new construction. I also think there are development pipelines and redevelopment pipelines that REITs have that will prove accretive to growth over the long term. For the malls, it’s really a story of no new construction within the sector, so pretty compelling growth characteristics that don’t have the supply risks that we may be seeing in some of the other sectors.”
Curbo discussed the potential impact of interest rate adjustments on REIT stocks.
“We’ve obviously been in an environment of declining interest rates. That has proved beneficial to REITs overall in terms of asset values,” he said. “It has proved helpful for companies in terms of acquisitions and, most importantly, in terms of refinancing debt. If we get a spike in interest rates, all those things that have been so beneficial go in reverse. Even if we don’t get that spike and interest rates are fairly static in this range, I think some of the benefits that some companies have derived are probably going to be less significant going forward.”
Curbo has had a bullish opinion of the regional mall and apartment sectors this year, and it doesn’t sound like that will be changing in the near future.
“We still like both sectors,” he said. “I think they offer a couple different things that are beneficial to a portfolio - one being that they offer above-average growth characteristics over the next several years, so they do trade at discounts to the underlying asset value. I think for the apartment sector, it has been a bit of an underperformer as there has been new construction. That has tended to moderate internal growth. As we move into next year and the upcoming year, I think there will be other sectors that will also be experiencing new construction. I also think there are development pipelines and redevelopment pipelines that REITs have that will prove accretive to growth over the long term. For the malls, it’s really a story of no new construction within the sector, so pretty compelling growth characteristics that don’t have the supply risks that we may be seeing in some of the other sectors.”
Curbo discussed the potential impact of interest rate adjustments on REIT stocks.
“We’ve obviously been in an environment of declining interest rates. That has proved beneficial to REITs overall in terms of asset values,” he said. “It has proved helpful for companies in terms of acquisitions and, most importantly, in terms of refinancing debt. If we get a spike in interest rates, all those things that have been so beneficial go in reverse. Even if we don’t get that spike and interest rates are fairly static in this range, I think some of the benefits that some companies have derived are probably going to be less significant going forward.”