美债收益率上行推动REIT并购，数据中心与养老地产受青睐

It's interesting because what we saw in the US, particular in the market, was that since the beginning of the year, you came in with rates with a strong relative valuation versus the S&P 500, maybe the rate cycle looking a little different after, you know, several years of raises since 2022 or rate increases. Then, you know, you had the war and that sort of all changed. Um, and you had the ten year go up from four 2 to 5 two.

What's interesting, though, is rates have sort of disconnected a little bit from that narrative, meaning there are 13% there, sort of in line with the S&P 500 this year. And so sort of ask why is that in that rising rate environment? I think a few things. Number one, you have a rotation out of growth to value. So I think at the beginning of the year, people were looking at their Mac seven and saying, maybe we're getting a little bit sort of long in the tooth in terms of growth.

Let's take some risk off the table. But I think more importantly, too, is when you look at the net income of the S&P 500 and you look at the ratio of the cash return to net income, it's at recessionary levels. And what that means is that the S&P 500, they're spending so much CapEx, the magic seven that the real cash return is low and their scarcity value to real cash. So rates fit that narrative really well for investors who are looking for that real cash return.

Yeah. Looking at the ETF flows so far this quarter. In the third quarter, around $22 billion gone into technology related funds, but only like a little under 5 billion has gone to the rest of the sectors. In the S&P 500. There has been 2 billion in real estate though. And so what are you seeing there when it comes to those types of flows? And what are your top questions from your clients? Yeah, we are seeing strong flows year to date.

So this um, when you add up our sort of retail and institutional investment flows into reach this year, it's the best that we've seen in about ten years. So we're pretty excited about that. And you know what is the narrative in terms of what are the CIOs saying. Why are we allocating to reach right now? I think part of it is that, you know, moving from growth to value, looking for hard assets, looking for real cash, but also looking at fundamentals.

You know, when we think about earnings growth here for REITs 8% earnings growth this year. If you look at senior housing and data centers, they're growing at 15%, 11%. And the you know, you talk about interest rates at five two. But when you look at the cash yield of real estate REIT's, they're at five, eight, five, nine. So you have a spread over the ten year. You've got pretty good earnings growth. And you have a supply picture that looks really sort of, um, benign relative to what we've seen over the past few years.

So that's sort of the conversations that we've been having with investors that's driving some of these flows. Talk to us about data centers. Because, boy, we started out thinking, boy, this is going to be the gift that's just going to keep giving you forever. But then it's become there's this backlash from folks around the country to become a little bit of a political issue as well. How do you guys think about investing in data centers?

Yeah, I was just down in Ashburn, Virginia, which is sort of the hub of data centers globally. And that market, there is still a lot under construction. It's 99% occupied quarter over quarter rent growth. There's been 18% in leases that were signed their five years ago. They're getting marked up 100%. So, um, it's alive and well in tier one markets for sure. And tier one markets, you know, you have barriers to entry to build like a tier one market is.

That's just it's tier one because it's on or close to a grid fiber. Yeah, high speed fiber. So Ashburn sits really at the crossroads of, um, not only sort of domestic fiber, but fiber coming in from overseas. So what, you know, people want what, um, tenants want is low latency. And so if you're by fiber, you know, you're not going to have any buffering when you're streaming. It's going to come down very quickly. So tenants will pay a premium for that.

So tier one markets are very strong. You are seeing a lot of push back in terms of, you know, municipalities um, and legislation. So um, I think when you look at the REIT portfolios, they've got a lot of stuff that's already entitled under development that they're going to put into production. Um, and then behind that they have land Bank. So it's really for us, it's how do you value that land bank if permitting access to power?

Well, that's getting harder. We need to be more conservative as to how we value the land bank versus the development pipeline. But we think there's still tremendous growth in there. There's, um, demand is growing and there's scarcity of sort of good areas to build. So where are the best opportunities right now? So I think there's, you know, two areas. We mentioned data centers. We still think that's a really attractive area within commercial real estate.

Um 11% earnings growth, very tight markets um limited access to power etc.. Senior housing is another area where we saw 15% or looking at me. Like I was it for you. But yeah. So 15% earnings growth. Um, you're at a point where you're seeing, uh, just a demographic wave of demand. The 80 year old population is growing at 5%, whereas supply in that space is growing at 1%. So you have a real mismatch of supply and demand there, which means really strong rent growth.

Some of the pressures that we saw over the past few years, like wage inflation for healthcare workers, has started to subside a bit. So that just helps, you know, boost noise for those properties. But then on the flip side, we have some areas that, um, you know, they are sort of maybe bottoming out and we're seeing some green shoots of the revenue line. So one that has not worked well that we're starting to get constructive on is cold storage.

So that's an area that's cold storage. Yeah. What is that. What are we storing. So that's a food. Frozen food okay. Uh, yeah. So yeah me too. I was like what is that. That's true. Yeah. So it's uh. Yeah, it's just really food storage and, uh, frozen foods in particular. And that business hasn't been growing like food consumption has been flat to down. Part of that's like GLP one impact. Um, but supply is very limited there right now.

And, um, the valuations are very attractive. They're trading at, you know, 9% implied cap rates. And one of the large companies suggested a joint venture deal to 7% implied cap right to sort of proof of real estate value there, plus a revenue line that's sort of bottoming, flattening and starting to inflect a little bit. So those are sort of the types of things that we're looking for. What's the consensus these days on office.

Yeah. So office is really um bifurcated. It's a mixed bag. But New York City San Francisco Class-A properties are extremely strong. Okay. Um, so, you know, when you look at leasing volume, rent growth, they're in those top areas in the top markets. It's really robust. You're getting, you know, um, record rents in certain areas of New York City and San Francisco, um, San Francisco, driven more by AI. But, you know, New York is back to work, right?

And we've taken some space offline. We've converted some of that to apartments we haven't built that much. Or what's built has been, you know, purpose built, uh, with tenants. So, um, you know, the question is, does that spread out to some other markets around the country and do we start to see some growth? I mean, you drive around anywhere, USA, suburbia, any office park has got that sign in the ground saying office space.

Space for rent, 10,000ft². Yeah. 20. That's I mean, that's still a thing, right? Yeah. Suburban office is still challenging especially, you know, out in tertiary marks. A lot of that was overbuilt. Um, that's not owned by the REIT's though. Rates are really in the urban and i