Philip Owens, managing director at Green Street Advisors, joined Nareit for a video interview at REITworld 2017.
Owens discussed some of the unique opportunities and challenges faced by smaller REITs.
“Smaller REITs tend to get ignored more than they should,” according to Owens.
In terms of institutional ownership, “there absolutely is a bias toward larger companies,” Owens said. He pointed out that companies with a market capitalization above approximately $400 million will start to attract investor attention. Once market capitalization reaches $1 billion, there’s significant interest, he noted.
Owens observed that one of the key challenges smaller REITs face is the size of their share float. Investors, even if they like the company, can’t get enough of an ownership stake to make it worth their time, he explained.
Other challenges faced by smaller REITs include their overhead burden, cost of capital, exposure to secondary and tertiary markets, and strategic communications, according to Owens.
Meanwhile, Owens also said institutional investors are starting to look outside their core markets in the search for yield.
“They are starting to look at smaller REITs, smaller operating companies and secondary markets. That bodes really well for companies that are considering going public that might be smaller today or for companies that have unique market exposures,” Owens said.