Real Estate Recovery Will Be Elongated, Analyst Says

Bruce Garrison, managing director with Chilton Capital, joined REIT.com for a video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Chilton Capital Management is a registered investment advisor (RIA) based in Houston. The firm's core business is providing investment advisory and trust services to private clients, family offices, endowments, foundations, retirement plans and trusts.

Garrison discussed which investors find REITs most appealing in the current market environment.

 “Since we’ve been at Chilton Capital, which started two years ago, our primary focus was on their high net worth client base,” he said. “That includes not only foundations, but IRA accounts and Roth IRAs. Increasingly we’ve been putting our emphasis on more institutional clientele—we just won our first mandate from a defined benefit plan. Bottom line, it comes down to investors looking for income and a better total return than they can achieve from other alternatives.”

Garrison said there are several trends he expects to play out in the REIT market over the course of the remainder of the year.

“I think it’s going to be a multi-fold story,” he said. “But primarily I think more and more investors will come to embrace how different this real estate recovery is relative to those in the past. We think it is going to be elongated, meaning very positive for many years. Normally it’s a six to seven year cycle—we think it’s going to be at least 10 and maybe more.”

Garrison went on to describe the characteristics of REITs that will perform best in a rising interest rate market.

“Some of the characteristics we’re looking for are low debt ratios and long weighted average maturity of the debt,” he said. “Also, the short-term lease sectors like apartments, storage and lodging that have pricing power and will be able to perform more immediately through better conditions ahead.”