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CFE Home > Real Estate > Reitvolatility > PROGRAM HOME

REIT Volatility: Causes and Effects

Recorded December 13, 2011

90 minutes

Agenda | Panelists | Who should attend | Get log-in

Overview

REIT stocks' volatility and correlation with the broader markets has increased measurably in recent years. Historically, REITs as an asset class have had low price volatility relative to the broader equity markets. However, various indicators suggest that this has changed dramatically.

Industry observers point to a variety of potential causes of this increase in volatility, and recent attention has focused increasingly on the role of real estate ETFs and, in particular, leveraged and inverse ETFs on the market volatility for their underlying securities.

SNL has gathered a group of market participants and analysts to discuss the issue, as well as its impact for REIT investors, along with some of the obvious (and perhaps less obvious) implications for the REIT industry and its ongoing need for equity capital via the public markets. Join us for an informative roundtable discussion.

Agenda

•	The Nature of the Problem. – Can we measure the increased volatility in REIT shares? – When did volatility become a big issue for REIT investors? – Is this a REIT problem, a financial sector problem, or a macro market problem? – What has volatility been like most recently? – What role have the ETFs played in today's higher volatility rates?
•	Who's the Culprit? – Are there certain underlying causes for, or contributors to, this heightened REIT stock volatility beyond increased ETF trading volumes and the existence of levered financial/REIT ETFs? – Might volatility be partially an equities-wide phenomenon, or is it particular to REITs? – Could it be a function of pricing volatility in the vast private commercial real estate markets, magnified by REITs' debt leverage?
•	Effects on Investors and Investment Decisions. – How does this substantial volatility affect daily trading activity in REIT shares? – Has it affected individual investors, directly or via REIT mutual fund redemptions? – What about institutional investors? – To what extent is it affecting the credibility of the entire REIT industry? – If volatility is primarily in daily price movements – but not in month-to-month or quarter-to-quarter volatility – can investors learn to live with it?
•	Forecasts for 2012 and Beyond. – Is this heightened REIT volatility problem short-term in nature, or one we'll have to live with for a long time? – Is there anything that REIT management teams can do about it? – Might any regulatory changes help mitigate volatility?

Learning Objectives

•	Identify measures of volatility in REIT securities
•	Understand how leveraged REIT ETFs operate and impact underlying REIT securities

Panelists

Richard Adler
Portfolio Manager and Co-Founder, European Investors, Inc.

Richard Adler co-founded European Investors, Inc. in 1983, and serves as investment strategist for the firm's real estate securities, equity and fixed income activities. In the mid 1980's Mr. Adler was jointly responsible for performing the initial due diligence on the investment opportunity of securitized real estate and spearheaded the firm's entrance into real estate securities investment management.

From 1973 to 1983, Mr. Adler was a vice president of Goldman Sachs, & Co. where he acted as a liaison between the firm's research department and foreign investors. He received his BA in Economics from Yale in 1968 and an MBA from Harvard Business School in 1973, where he was a Baker Scholar. Richard is a former U.S. Navy officer.

Lynn Lewis
Managing Director, Sales and Trading, Green Street Advisors, Inc.

Lynn Lewis is a securities broker dealer principal and has been active as a REIT trader since 1979. Since 1995, she has served as head of Green Street's Dallas-based trading operation. From 2008 to 2010, Ms. Lewis worked in London, establishing Green Street Advisors' European trading and sales operation.

Before joining Green Street, Ms. Lewis worked at Rauscher Pierce Refsnes and Lovett, Mitchell, Webb & Garrison. She earned her B.F.A. from the University of Houston.

Glenn Mueller, Ph.D.
Professor, Denver University, Franklin L. Burns School of Real Estate and Construction Management; Real Estate Investment Strategist, Dividend Capital Securities

Dr. Mueller has 36 years of real estate industry experience, including 27 years of research. His research experience includes real estate market cycle analysis, real estate securities analysis, real estate capital markets, portfolio and diversification analysis, seniors housing analysis and both public and private market investment strategies. In addition, he has performed specific macro- and micro-economic level analyses, both nationally and internationally, on office, industrial, apartment, retail, hotel, single-family residential, and senior housing sectors.

He is a frequent presenter of research at national and international conferences on topics ranging from market cycle analysis, to portfolio strategies, to investment analysis and real estate securities analysis.

Prior to Denver University and Dividend Capital, Dr. Mueller was a professor at Johns Hopkins University and Colorado State University. He has held top research positions at Legg Mason, Pricewaterhouse, ABKB/LaSalle Investment Management, and Prudential Real Estate Investors. He was also a developer/builder in New England.

Dr. Mueller holds a B.S.B.A. with finance major from the University of Denver, an MBA from Babson College, and a Ph.D. in Real Estate from Georgia State University.

Ralph L. Block (moderator)
Contributor, SNL Financial

Ralph Block has been a participant in the REIT industry in various capacities since 1993. He is author of the most popular book on REIT analysis, Investing in REITs, and was a principal and Portfolio Manager at Phocus Financial, focusing exclusively on investing in REIT stocks from 2003 to 2011.

From 1993 to 2003 Mr. Block was chief REIT Portfolio Manager with Bay Isle Financial LLC. He also authored The Essential REIT, a weekly REIT investing newsletter. In recognition of his contributions to the sector, Mr. Block was awarded the NAREIT Industry Achievement award in 2004.

Mr. Block practiced securities law for twenty-seven year and is a graduate of UCLA and UCLA School of Law.

Who will benefit

•	REIT investors at hedge funds, pension funds, mutual funds, traditional asset managers, insurers, and private equity firms
•	CFOs and IROs at REITs
•	REIT equity research analysts
•	Financial advisors to REITs, including investment bankers and financial consultants
•	Consultants who advise real estate and banking clients

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