Ed Walter, NAREIT chair as well as president and CEO of Host Hotels and Resorts (NYSE: HST), spoke to REIT.com during NAREIT’s annual Washington Leadership Forum (WLF).
Walter offered his thoughts on some of the key policy issues currently facing the REIT industry. He said there are three major policy items facing U.S. REITs at the moment: treatment of non-U.S. investors in U.S. real estate; ensuring that brick-and- mortar and online retailers are treated equally from a sales tax perspective; and beginning the discussion to the government’s terrorism reinsurance backstop program.
Walter also discussed his outlook for REIT fundamentals and the commercial real estate recovery. When it comes to REIT fundamentals, Walter said REITs are doing well overall.
“Despite the fact that we’ve had somewhat slower economic growth than we all would have liked to have seen, the reality is that the fundamentals across all real estate sectors are very good, bottom-line cash flows are all going up and I think that we feel it’s going to continue for the next several years,” he said.
While the recovery efforts from the recession have been slower than some would have liked, Walter said there are some benefits to a modest recovery. For example, the slow recovery should translate into an extended cycle across all sectors. With lower GDP growth, Walter said most sectors are experiencing lower supply growth, too.
“If supply grows more slowly and with demand continuing to grow that should naturally lead to a longer cycle in most sectors” he pointed out.
As the real estate industry benefits from its ability to acquire affordable equity and debt, Walter said he has noticed a change in how companies are using their capital. The bulk of the capital being issued in 2009 and 2010 was intended to address liquidity issues and repair balance sheets, according to Walter. However, he said today’s capital raises are primarily intended to use equity to grow and build companies, usually via acquisitions. On the debt side, he said most REITs are moving to extend their maturities and lock in low interest rates.