At a time when Real Estate Investment Trusts (REITs) as an asset class are gaining significant attention worldwide, the webinar, Investing in Global Public REITs, jointly presented by CNBC-TV18 and PropShare Capital, sets the stage for a deep dive into the world of REITs. This conversation, hosted by Sonia Shenoy of CNBC-TV18, features Kunal Moktan, Co-founder and CEO of PropShare Capital, as he shares his expertise on this evolving investment opportunity.
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The conversation kicked off with Kunal defining the core concept of global public REITs and how they distinguish themselves from other investment options. REITs are publicly listed entities that own income-generating real estate properties, including commercial offices, warehouses, retail malls, and more. Kunal highlighted that REITs have been a global phenomenon for several decades, originating in the US. In India, REITs have only gained prominence more recently, with the first listing in 2018. The term ‘global’ in this context signifies the REITs presence on global stock exchanges.
The discussion then turned to the advantages of investing in global REITs, particularly in the backdrop of the current real estate market boom. Kunal emphasized that REITs offer investors an avenue to own a fraction of high-quality real estate assets at a fraction of the actual property cost. The model enables access to these assets without the need for significant capital investments.
Of course, there are numerous factors that investors should consider before entering the world of REITs. Kunal emphasized the importance of evaluating the quality of a REIT's portfolio: different REITs focus on diverse real estate segments, such as offices, retail malls, or logistics properties and understanding the portfolio composition is crucial. Additionally, investors should assess the REIT's yield, management quality, corporate governance, and the discount to NAV.
Kunal also explained the relationship between REIT valuation and interest rate cycles. High-interest rate environments can lead to lower REIT stock prices as they are compared with risk-free securities, impacting yields. The recent rise in interest rates, driven by inflation and central bank actions in the US, has influenced REIT prices. Kunal identifies this period as an opportunity, as historical evidence suggests that when REITs trade below NAV at a substantial discount, investors tend to achieve attractive returns upon recovery.
Of course, not all global REITs are following the same trends, as the underlying geographical regions and sectors have a significant impact on REIT performance. Kunal suggests that the United States stands out as a prime destination for REIT investments, especially in sectors such as industrial warehousing, healthcare, and data centers; thanks to the rise of e-commerce and the increased demand for warehousing space.
For newcomers in REIT investment, Kunal advises a conservative approach that deals primarily with blue-chip REITs. He emphasizes the importance of assessing factors such as market capitalization, credit rating, yield, and discount to NAV. Investing in well-established REITs at a discount presents a less risky entry point for those new to the asset class. The conversation concluded with a discussion of risks associated with investing in REITs, which, like any investment, carry some inherent risks that investors should be aware of.
Note:
This is a partnered post.
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