Nareit's REIT Report Podcast

Angel Oak Mortgage, Inc . (NYSE: AOMR) CFO Brandon Filson sees the non-qualified mortgage (QM) loan segment reverting over time to its historical level of about 10% of the overall mortgage market, compared to 2% today, providing the mREIT with significant opportunity for growth in the years ahead.Speaking on the REIT Report, Filson noted that 10% of the overall market would be about $200 billion, versus about $25 to $50 billion today.Angel Oak Mortgage, which went public in June 2021, focuses on acquiring and investing in first lien non-QM loans and other mortgage-related assets in the U.S. mortgage market. Non-QM loans are not backed by government agencies and are aimed at homebuyers unable to meet the strict criteria of a qualifying mortgage in areas such as income or personal debt.

Business models are central to corporate performance and wealth creation, and even the most complex models can be reduced to six basic variables, says Chris Volk, a veteran REIT executive, business leader, and author.Speaking on the REIT Report, Volk discussed his upcoming book, The Value Equation, which will be published on May 10.Volk also discussed his career, during which he introduced and led three public companies. One of those was STORE Capital Corp. (NYSE: STOR), his third net lease iteration, formed in 2011. Combined, the companies provided more than $20 billion in growth capital to thousands of businesses, he said.

Capital flow of non-traded alternative investments could grow to a $250 billion a year market within the next five years, with early 2022 data already pointing to a record-breaking year for fundraising in the sector, according to the Institute for Portfolio Alternatives (IPA).Speaking on the REIT Report on April 18, Anya Coverman, SVP, government affairs and general counsel at IPA, said the outlook for 2022 is “incredibly bright. You have Blackstone, Starwood, and other large asset managers leading with a blockbuster year.”Citing research data from Robert A. Stanger & Co., Coverman said sales overall are topping $19.1 billion in January and February. “So, this is already on pace to beat last year's record tally of $70 billion.”

Outside of the industrial sector, residential real estate in the United States “probably has the best supply-demand backdrop in global real estate right now,” says Ryan Dobratz, portfolio manager of the Third Avenue Real Estate Value Fund.Speaking on the REIT Report, Dobratz said he sees “a significant amount of demand for single family housing, in particular within more affordable Sunbelt markets, at the same time that supply is very, very low.”Companies active on the home building side are seeing benefits, Dobratz said, including timber REITs. Timber REITs are going to be able to generate much higher levels of cash flow and ultimately pay much higher dividends, given residential market conditions, he noted. “Timber is also a terrific place to be invested in an inflationary environment.”Dobratz pointed to the war in Ukraine, supply chain issues, and high inflation as issues of macro concern right now. At the same time, he noted that “commercial real estate has historically been a great place to park capital and to protect it from inflation over time.”

Proposed Securities and Exchange Commission (SEC) rules to enhance and standardize climate-related disclosures for investors are just the first step in terms of finding the right balance of what's required from a regulatory perspective, said Uma Pattarkine, a senior investment strategy analyst and global ESG lead for CenterSquare Investment Management.Pattarkine told the REIT Report that the SEC proposals were “a lot more robust than I had originally anticipated,” given the level of initial disclosure, and require REITs to be able to get a lot of that data at the property level.Many REITs, Pattarkine said, are already committed to science-based targets. For such companies, the SEC proposals will not impose any additional burdens. However, for REITs that have been lagging in terms of collecting data, “it's going to take a lot of work for them to get to what the SEC might require from a disclosure perspective.”

Laurie Baker, COO at Camden Property Trust (NYSE: CPT), says the importance of gender equity and diversity within the commercial real estate industry has been amplified as a result of the pandemic.Speaking on Nareit’s REIT Report, Baker said that while more women are rising to key leadership positions across the industry, the pandemic “in many ways stalled the progress that was being made because they [women] were disproportionately forced to choose between careers and caregiving for their family.”At the same time, Baker said, the pandemic also presented opportunities in the form of new forms of flexibility and “resetting definitions of career satisfaction and what company success and personal success is.”Baker, who was named COO in late 2021, also reflected on her more than two decades at Camden, including her work implementing pioneer revenue management technology as well as helping to create Camden’s first investment funds.

Dallas Tanner, president and CEO of Invitation Homes Inc. (NYSE: INVH), says the REIT’s $250 million investment in Pathway Homes will expand choice in the housing market by helping first-time homebuyers who lack access to traditional avenues to home ownership.Speaking on the REIT Report, Tanner said Pathway, launched in partnership with Regis Group and Fifth Wall, is an opportunity to support a growing segment in the marketplace—individuals that want a lease option purchase agreement or the chance to build equity in a home over time.Pathway works directly with customers to identify and purchase a home, offering them the opportunity to first lease and then buy the home outright at a future date. In addition to investing in the homes and technology platform for Pathway and its real estate fund, Invitation Homes will provide maintenance and other services to all Pathway homes, enabling the REIT to broaden its third-party property management services.

Committed leadership and statements backed up by substantive action are key to ensuring that organizations make progress on diversity, equity, and inclusion (DEI), according to Kira Banks, co-founder of the Institute for Healing Justice and Equity at Saint Louis University, where she is also an associate professor in the department of psychology.Speaking on the REIT Report, Banks notes that since George Floyd's murder in 2020, more leaders in business are understanding that DEI is core. “They understand it is a part of the work of doing business nowadays.” However, the work won’t be sustainable unless leadership is fully committed, Banks says. “If leadership is not on board, it gives other people an opportunity to opt out.”Banks also says that more organizations are understanding that symbolic statements are insufficient and must be backed up with action. “Those sorts of symbolic gestures in some ways can do more harm than good if they're disingenuous, if they're not followed up by anything substantive,” she notes.

Anticipated interest rate increases of about one and a half percentage points by year-end will still create a “very favorable” environment for commercial real estate, says Nareit Senior Economist Calvin Schnure.Speaking on the Nareit REIT Report, Schnure noted that it is “appropriate” for the Federal Reserve to be raising interest rates at this point and removing the stimulus that was put in place early in the pandemic.Schnure noted that goods inflation has been at about 12% over the past year, while service price inflation has slowed somewhat. “This suggests that we're not having a long- term problem from wage pressures with inflation. I do expect inflation to slow down, mostly in the second half of this year,” he said.REITs, Schnure said, perform better than most other sectors during periods of moderate to high inflation because they represent a real asset that own properties whose values rise with prices and with leases that can respond to changing market conditions.

Transaction activity in the hotel sector this year is expected to be “incredibly strong,” with robust pricing continuing in the luxury resort segment and the start of a recovery in business transient and group demand, according to Kevin Davis, CEO of JLL Hotels & Hospitality, Americas.Speaking on the REIT Report, Davis noted that JLL has more than $12 billion in its U.S. hotel sales and financing pipeline for 2022, the highest level since 2015, which was already a record year from a transaction volume perspective. If JLL is a proxy for the market, “my expectation is that you'll see a lot of transactions this year.”Davis said anticipated gains for 2022 follow a particularly strong year for the industry in 2021. This was fueled by the large amount of capital that had aggregated on the sidelines to take advantage of potential distress in the sector—which never materialized—as well as pent-up consumer demand for travel.