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Lesson Learned: “The importance of a
strong balance sheet when you are
coming into very turbulent waters, as
we have over the last year, and to make
sure that your debt maturity schedules
are staggered so that there’s not a significant, material amount of debt that
is coming due at a time when lenders
are running for cover.”
Challenges and Opportunities: “As consumer spending resumes
and increases, our retail tenants will do better. They can afford to
pay higher rents. Our occupancy rates will be higher. So I’d say
the biggest challenge for us is to make sure the economy does
recover. Until it does, there will be challenges in our sector in
terms of occupancies and rents.”
Role of REITs: “My personal feeling is that most REITs
will evolve into operating managers for institutional capital.
Because most REITs operate with low leverage, their blended
cost of capital is much too high to be competitive to buy the very
best properties unless they team up with institutional capital.
Then the REIT would earn money as fees and leasing commissions as a way to enhance its earnings as a partner in these joint
ventures.
I think you’re going to see a continuing evolution with most
REITs looking to create joint ventures and commingled funds as
a way to enhance the returns from real estate, which by definition
today are rather flat.”
“They always say, ‘Hope for
the best, prepare for the worst.’
I think a CEO’s job is to make
sure you have all of your
downsides covered.”
O
K
Lesson Learned: “If you are a public com- pany and have good use of proceeds you will be able to raise capital.” Challenges and Opportunities: “Our number one driver is people moving, and people are still moving. Fifty-one percent of our customers are storing with us because they are in some kind
of transition. As jobs and consumer sentiment come back, I
think our discretionary customer will come back.”
Role of REITs: “We’ve been to this party once before, and it was
a good party for the public real estate companies. I took a company
public in 1994, and the next five years were just incredible years for
growth as we consolidated a lot of commercial properties around the
country into the hands of the good public companies that had access
to capital. That’s right around the corner again.
I know it’s not happening as quickly as a lot of people would hope,
but I think, especially in our sector, it will start happening toward the
end of 2011. REITs have terrific growth opportunities ahead.”
HAMID MOGHADAM, Chairman & CEO
• AMB Property Corporation (NYSE: AMB)
• Sector: Industrial
Lesson Learned: “Two themes were strongly reinforced for us during this market downturn: the importance of managing leverage for every stage in the cycle and staying true to a cycle- tested strategy.” Challenges and Opportunities: “[In- dustrial performance] is strongly
linked to growth in global trade, the major driver of demand
for our business. For the last 50+ years, global trade has grown
at four times the rate of global GDP growth. Current consensus
estimates for 2010 GDP growth are 2. 4 percent in the U.S. and
2. 6 percent globally. In addition to the positive demand characteristics, the industrial sector will benefit from limited supply in
the next couple of years.
The keys to 2010 will be a continued focus on asset utilization
and patience. We need to wait for the truly attractive investment
opportunities and to maximize long-term leasing activity. There
is a lot of earning potential embedded within our portfolio that
can be realized with no additional capital outlay.”
Role of REITs: “REITs remain and will continue to be an excellent investment option for a well-balanced portfolio. The risk/
return relationship is far more attractive because of the expected
returns in the form of dividends. Effective and efficient operation
and management of space will prove to be of significant importance for REITs with lower leverage.”
