Jeremy Metz joined BMO Capital Markets Corp. in 2017 as a Senior Analyst covering REITS. Previously, he worked at UBS Securities as a Senior Analyst on their number-four Institutional Investor-ranked U.S. REIT team, covering the retail, storage and industrial subsectors. Prior to UBS Securities, he was an Analyst at Deutsche Bank from 2010 to 2013. Mr. Metz also held positions at Louis Dreyfus Investment Group, where he was Co-Head of Real Estate Acquisitions, and J.P. Morgan Asset Management, where he was Vice President, Real Estate Acquisitions and Asset Management for seven years. Mr. Metz works in collaboration with John P. Kim.
John P. Kim joined BMO Capital Markets Corp.’s U.S. Equity Research team in 2014 as a Senior Analyst covering REITs. Prior to joining BMO Capital Markets Corp., he was head of Australia property research at CLSA in Sydney, covering REITs and developers from 2010 to 2014, where he ranked number one in Australia property and number two in overall equity research by Global Capital AsiaMoney. Previously, Mr. Kim was a Senior Analyst at Bank of America Merrill Lynch from 2004 to 2010, where he held various roles including Head of AsiaPac property research in Hong Kong and Head of Australia property research in Sydney.
In this exclusive interview in the Wall Street Transcript, Mr. Metz and Mr. Kim detail which specific REITs sub-sectors will stand out over the next several years. Mr. Metz sees industrial properies as beneficiaries of the current economic cycle:
Mr. Metz: Looking across REITs, I think one of the biggest areas of strength is industrial. Industrial is a sector that continues to benefit from both secular and cyclical tailwinds. On the secular side, e-commerce has been underestimated in terms of the demand it’s driving and where we’re at in that evolution, and resulting supply chain reconfiguration it’s causing. I think there’s still a lot of room to run there. More broadly, industrial is one of the few REIT sectors that actually is maintaining if not gaining pricing power, whereas a lot of other sectors are past peak or seeing pricing power diminish.
Mr. Kim sees a tightening Federal Reserve and several other factors coming together to form a cautiously optimistic view:
Mr. Kim: So far there’s little evidence that rising rates have had an impact on cap rates, but we believe at some point cap rates — even though it trails — will have to move up with rising costs of capital. That may partially be offset by higher growth expectations, so asset values may remain relatively stable, but what was a massive tailwind over the past decade is likely going to be a headwind going forward. The other impact is debt refinancing: As companies look to refinance debt, it’s going to be a headwind to earnings growth.
To get all the specific recommendations, read the entire interview in the Wall Street Transcript.
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