Capital One Banker Says Technology Having Profound Impact on Real Estate
12/06/2017 | by
Article Author(s)

Greg Steele, managing director at Capital One, joined Nareit for a video interview at REITworld 2017.

According to Steele, one of the more surprising developments in real estate capital markets this year has been the impact of technology on real estate. The stock performance and capital raising of retail REITs have come under pressure this year, in part due to the impact of e-commerce.

Meanwhile, data center REITs and tower REITs have traded above net asset value, and capital raising in those sectors has proceeded at about twice last year’s pace, he said.

“These are not necessarily things we didn’t expect, but the divergence in performance and the impact of technology has been really profound this year,” Steele said.

Meanwhile, Steele said initial public offering (IPO) activity has been relatively quiet this year. He noted that investors are going to continue to be “very selective” about which companies go public, given that the real estate cycle has reached a mature stage.

Investors will look for management teams with public company experience and companies that have sufficient scale and the right cost structure to compete with their public peers, according to Steele. Furthermore, investors will look for an “attractive entry point—they’ll look for a meaningful discount to the underlying value on the balance sheet,” he said.

However, Steele said he still sees room for more industrial and other technology-driven real estate assets to end up in the portfolios of publicly traded REITs over time.

Turning to foreign interest in U.S. real estate, Steele said Chinese investors have “taken their foot off the gas” in terms of investing in U.S. assets. Meanwhile, robust activity continues to be seen by investors from countries including Canada, the Netherlands and Singapore.