REIT Advisor: Ditch Debt for Best Multifamily Investment Returns

Real Estate Investment Trusts have been a major player in the senior housing acquisition and finance industry in recent years, having a low cost of capital and funds to invest in the sector. Whether REITs will stick around is another question, as they have comprised the vast majority of transactions over the past two years.

A recent interview from National REIT Investor takes a look into the future of the REIT as an investor in multifamily housing, including what’s on the horizon in terms of pricing.

Green Street North American REIT manager Jim Sullivan shared his “30,000-foot” perspective with the publication.

Advertisement

National Real Estate Investor reports:

REIT Insider: Multifamily has been on a terrific run—in fact, some reports suggest the sector is getting overheated. What are your thoughts on multifamily REIT valuations—is there still room for growth or are they at peak pricing?

Sullivan: The supply/demand picture in the apartment business makes it a great time to be a multifamily landlord. However, rent growth has dramatically outpaced income growth, so some slowing of the torrid growth pace is to be expected. What happens in the single family market over the next two to three years could have a major impact on apartment operating fundamentals and values.

Advertisement

REIT Insider: Most REITs have cleaned up their balance sheets significantly and are in pretty decent financial shape. What do you see as the biggest threat to REITs today?

Sullivan: The biggest threat to REITs today is balance sheet complacency on the part of management teams. While REITs are generally in strong financial shape, some companies still have far too much debt on their balance sheets. In several studies levered REITs consistently fail to deliver higher returns to justify their added risk.

Read the full interview from National Real Estate Investor.

Recommended SHN+ Exclusives

Written by Elizabeth Ecker