Who Are The Best Investment Managers for US REIT's?

A common theme across all our research feeds currently is the inflation protection qualities of specific asset classes. Or put another way, how will certain assets perform in a rising rate environment. Research on REITs is therefore getting lots of traffic. Perhaps because the evidence of their inflation protection qualities seem to be inconclusive - it depends who is providing the inputs (a REIT manager or a non-REIT manager). And the answer may be a function of the ability to raise rents for the underlying assets.

The answer depends on who you talk to.

At 30 June 2022, the P/NAV of U.S. listed real estate was -23% implying a listed market cap rate of 6.9%. Interestingly as of 31 December 2021 the numbers were -3% and 5.9% respectively. And yet, nearly 70% of real estate companies raised their Funds from Operations (FFO) growth guidance to 11.2% for 30 June 2022 (versus 10.6% 31 Dec 2021).

Does the combination of U.S. REITs trading at steep discounts to intrinsic value, supported by sound fundamentals suggest an interesting entry point? The answer needs to be seen in the light of the macro uncertainty and the confidence that investors put on forward estimates. Silver linings also have clouds.