Niche REIT panel

NEW YORK CITY-To illustrate why they believe in the long-term prospects for their respective sectors, four non-traded REIT executives at a panel discussion Thursday asked for a show of hands. How many in the audience were baby boomers, asked Janice Ryan of Strategic Storage Trust. How many owned cell phones or personal computers, asked John Carter of Carter Validus Mission Critical REIT. How many went to doctors, inquired John Mark Ramsey of Cornerstone Healthcare Plus REIT. How many had roofs over their heads, the Shopoff Group’s Edward Fitzpatrick wanted to know.

All four executives were bullish about the niches their REITs have carved out: self-storage, data centers, healthcare and land development, respectively. “This is the asset class of the future,” declared Carter, CEO and co-founder of the data center REIT, which in March filed with the SEC for a $1.5-billion IPO.

Ryan, first VP for business development at Strategic, noted that the self-storage sector does well in good times or bad. “You’re either putting away your jet skis for the winter or you’re storing all your furniture when you have to move back in with your parents,” she quipped. It’s also a sector in which property ownership is so diffuse that Public Storage, the market leader, has only a 5% share.

Ramsey emphasized the dramatic demographic shifts that will intensify demand for healthcare properties, ranging from medical office buildings to assisted living facilities. The Cornerstone CEO cited the aging population, advances in medical technology that promote longer lives, the increasing share of national GDP that healthcare will command and medical office’s move away from downtown areas into suburban campuses. “We want to be in the path of all these converging trends,” he said.

Fitzpatrick, while acknowledging that the past few years were tough for residential developers, said the demand for undeveloped land—which his REIT specializes in—was already beginning to return. “In two years, Las Vegas will be the baby boomer capital of the world,” the Shopoff EVP predicted.

And all four panelists were equally enthusiastic about the prospects for their trusts, despite competition and other challenges. The executives spoke at a panel titled “Examining Opportunities within Alternative Investment Classes,” held Thursday afternoon as part of the seventh annual New York Non-Traded REIT Industry Symposium.

A particular challenge in the self-storage space, said Ryan, is the need to educate broker-dealers. Hand in hand with the simpler operating model and lower expenses of self-storage facilities is the fact that the properties look drab by comparison to an office tower. But broker-dealers need to look past that, she said. “You can’t just say ‘that’s a pretty picture, so that’s what my client should own.’”

Similarly, an earlier panel liked non-traded REITs’ prospects as compared to those of their publicly held counterparts, while acknowledging that both classes of REITs face the same frustrations in finding accretive buying opportunities. Thomas Robinson, senior advisor at investment banking firm Stifel Nicolaus, predicted that pension advisors may begin to migrate over to the non-traded side “because they’re beginning to get flack from their investors.”

Nicholas Schorsch, chairman and CEO of American Realty Capital, concurred. “They’re looking for alternative sources as a backup, because they believe they can co-invest well,” he said. “And you know what? They can.”