Ed Fritsch

What a Difference a Year Makes

os@interactivestrategies.com — Thu, 29 Sep 2016 11:45:00 +0000

What a Difference a Year Makes os@interactive… Sep. 29 2016

Ed Fritsch

Ed Fristch is the president and CEO of Highwoods Properties. He served as the 2014 Nareit chair.

What a Difference a Year Makes

A number of notable developments occurred that should help shape and strengthen the REIT industry in the future.

During my tenure this year as NAREIT Chair, a number of notable developments occurred that should help shape and strengthen the REIT industry in the future.

In September, Real Estate made the eagerly anticipated move to its own headline sector under the Global Industry Classification Standard (GICS). Much like when REITs were added to the S&P indexes, elevating Real Estate to a headline sector will increase the visibility and prominence of REITs and publicly traded real estate companies in investment portfolios. This change was certainly a watershed moment for our industry.

Additionally, NAREIT’s long-running efforts to reform the Foreign Investment in Real Property Tax Act (FIRPTA) rules came to fruition. In December, President Obama signed the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) into law, which included significant modifications to the FIRPTA rules. It represented the culmination of a seven-year campaign headed by Reps. Kevin Brady (R-TX) and Joe Crowley (D-NY) and Sens. Mike Enzi (R-WY) to remove inappropriate barriers to cross-border investment in U.S. real estate through REITs. Provisions in the PATH Act also gave REITs more flexibility to manage their operations efficiently and effectively.

Over the past year, U.S. REITs, meanwhile, found themselves on firm financial footing. The total return of the FTSE NAREIT All REITs Index in 2015 bested the S&P 500 for the second year running. With a gain of more than 14 percent through the first eight months of 2016, REITs are on pace to make it a third straight year, as the S&P 500 was up 7.8 percent during the same period.

In June, the Brexit vote had a measurable immediate impact, but the global markets, especially in the U.K., are continuing to sort through the long-term impact on real estate. As documented in this issue of REIT magazine, the nature of real estate in the current economic environment—particularly U.S. real estate—should likely continue to hold significant appeal for investors around the world.

Working closely on NAREIT matters over the last 12 months vividly confirmed to me that NAREIT CEO Steve Wechsler and his capable and dedicated team at NAREIT are an invaluable resource for us as we work to extensively communicate, domestically and abroad, about the REIT approach to real estate investment.

Of course, I’ve also seen that our successes are made possible thanks to the skill and engagement of NAREIT’s members, whether they are senior executives at REITs or industry professionals. When NAREIT meets with investors, policymakers and other stakeholders, our collective story is told—all done with the cohesive collaboration of industry members and NAREIT’s talented staff.

I am profoundly grateful for the opportunity I have had to serve as Chair and help to educate and spread the word about REITs and publicly traded real estate. Lastly, registrations for at REITWorld 2016: NAREIT’s Annual Convention for All Things REIT in Phoenix are robust, and we look forward to another successful convention.

Ed Fritsch
NAREIT Chair
President & CEO, Highwoods Properties

The Link Between Sustainability and Performance

os@interactivestrategies.com — Fri, 22 Jul 2016 13:30:00 +0000

The Link Between Sustainability and Performance os@interactive… Jul. 22 2016

Ed Fritsch

Ed Fristch is the president and CEO of Highwoods Properties. He served as the 2014 Nareit chair.

Easy as E-S-G

A growing body of evidence tells us that companies with rigorous environmental, social and governance programs outperform their peers.

A growing body of evidence tells us that companies with rigorous environmental, social and governance (ESG) programs outperform their peers. In 2015, researchers from the University of Oxford and asset management firm Arabesque Partners published a report that illustrated just how strong the link between sustainability and performance truly is.

Their expansive review of more than 200 academic studies, news articles, books and industry reports determined that:

80 percent of studies found that sound sustainability practices had a positive impact on companies’ stock prices;
90 percent showed that effective ESG platforms lowered the cost of capital for companies;
88 percent indicated that good sustainability practices boosted operating performance for firms.

The real estate business is no exception. A 2015 University of Cambridge analysis of data from the GRESB Survey concluded that a higher ranking in the survey has a correlation to better financial performance for REITs. Furthermore, the Cambridge study showed that investing in sustainability improves REITs’ operating performance, while lowering their risk exposure and volatility.

The results of the 2015 edition of the GRESB survey itself demonstrated the extent to which REITs around the world have inculcated ESG programs into their DNA. More than 700 property companies and funds worldwide participated in the 2015 survey, a net increase of roughly 10 percent from the previous year. Nearly 95 of those participants have a dedicated sustainability decision-maker within the organization, while more than 90 percent have established an ESG taskforce or committee.

That growing level of commitment comes at a time when investors are actively seeking out an ever-broadening range of sustainability information from companies. The subject of this issue’s “Capital Markets” column, Wellington Management’s Bradford Stoesser, is far from alone in his knowledge of sustainable real estate.

Industry stakeholders and financial services firms are simultaneously exploring new ways to satisfy the demand for ESG information. Earlier this year, for example, financial research firm Morningstar introduced the Morningstar Sustainability Rating, a system for evaluating mutual funds and exchange-traded funds with regard to how well companies handle ESG risks and opportunities.

NAREIT currently supports the development and adoption of effective sustainability practices by REITs in a variety of ways. They include the annual Leader in the Light Awards to honor member companies that have demonstrated superior and sustained sustainability practices. The Leader in the Light judging criteria now incorporate the results of the GRESB survey, enabling competing companies to measure their performance against a global benchmark. Additionally, NAREIT’s annual Leader in the Light Working Forum brings together the REIT industry’s leading authorities on sustainability for a collaborative workshop.

ESG standards and best practices will surely continue to evolve. Investors will very likely continue to expect more from REITs, too. But the progress that has been made to this point strongly indicates that the industry is equipped to continue to up its sustainability game.

Ed Fritsch
NAREIT Chair
President & CEO,
Highwoods Properties, Inc.

GICS Brings More Visibility to the REIT Industry

os@interactivestrategies.com — Thu, 26 May 2016 14:00:00 +0000

GICS Brings More Visibility to the REIT Industry os@interactive… May. 26 2016

Ed Fritsch

Ed Fristch is the president and CEO of Highwoods Properties. He served as the 2014 Nareit chair.

Worthy of Recognition

What probably looks like a simple administrative matter to the outside world could ultimately mean a great deal to the REIT community.

This issue of REIT magazine highlights the impending elevation of Real Estate to a new Headline Sector under the Global Industry Classification Standard (GICS®). On one level, the GICS move just serves to separate real estate companies, including Equity REITs, from Financials under the most common rubric for categorizing businesses in the world of investing. It is similar, in that sense, to changes made to the North American Industry Classification System in 2007 and the Morningstar Global Equity Classification Structure in 2010.

On another level, what probably looks like a simple administrative matter to the outside world could ultimately mean a great deal to the REIT community.

GICS frames the landscape of modern investing. It helps direct the creation of investment products. Meanwhile, members of the financial media take their cues from it when reporting on market trends and performance. Similarly, researchers use it to guide their investigations into market data.

As such, this will bring more visibility to the REIT industry. What’s more, a Headline Sector under GICS further validates the REIT approach to real estate investment and affirms the role REITs play in our everyday lives.

REITs build, own and operate the places where people live, work and play. These include state-of-the-art industrial facilities, class-A office buildings and welcoming homes, to name a few. In fact, REITs help make it possible for people to watch a high-definition video on their phone, undergo a cutting-edge medical procedure or travel to another part of the world.

That’s why in September, Real Estate will become the first new Headline Sector addition to GICS since it was created in 1999. When announcing the change, S&P Dow Jones Indices and MSCI, the two organizations that oversee GICS, stated “real estate is an important and growing part of major economies throughout the world.” They added the move was necessary “to ensure that GICS is reflective of today’s markets.”

REITs and real estate investment in general wouldn’t be in this favorable position without prudent management oriented towards building durable companies that can play a vital role in the global economy. The entire REIT industry should celebrate this collective achievement and prepare for more time in the spotlight.

Ed Fritsch
NAREIT Chair
President & CEO,
Highwoods Properties, Inc.

REITs Reshaping Communities

os@interactivestrategies.com — Fri, 25 Mar 2016 14:45:00 +0000

REITs Reshaping Communities os@interactive… Mar. 25 2016

Ed Fritsch

Ed Fristch is the president and CEO of Highwoods Properties. He served as the 2014 Nareit chair.

REITs Reshaping Communities

At their core, REITs provide the spaces for their tenants to thrive.

The day-to-day realities of managing a modern business—things like finance, branding and technological disruption—sometimes take attention away from the fundamental purposes that companies serve for their customers. Automakers construct the cars that take people where they want to go. Pharmaceutical companies manufacture the drugs that help keep us healthy.

At their core, REITs provide the spaces for their tenants to thrive. Tour a REIT-owned apartment complex, resort hotel or office building, and you’ll see tangible proof of that objective in action.

On an even broader scale, REITs can play a role in helping entire communities flourish.

This issue of REIT magazine features the debut of “REITs: Reshaping Communities for the Better.” The new series will include complementary magazine articles and web videos on REIT.com that detail how REITs’ development and redevelopment projects contribute to the economic and social growth of neighborhoods and locales around the country.

The first project in the spotlight is The Yards, a mixed-use development owned by Forest City Realty Trust (NYSE: FCE.A). The emergence of The Yards from what were essentially 48 acres of abandoned Navy industrial facilities on the waterfront of the Anacostia River has had a hand in helping to revitalize southeastern Washington, D.C.

For projects of this scale, a seamless transition from enervated to invigorated takes the kind of ingenuity, planning and foresight that have come to define publicly traded REITs. In addition to best-in-class management teams and top-notch development platforms, REITs have ready access to the capital markets to fund ambitious, community-enhancing projects.

In fact, The Yards is just one of many examples of transformative development being done by REITs. From rehabbing dilapidated factories to building state-of-the-art data centers, REITs are partnering with communities to give them new life. NAREIT looks forward to sharing more of these stories in the future.

Ed Fritsch
NAREIT Chair
President & CEO,
Highwoods Properties, Inc.

Showing the REIT Way

os@interactivestrategies.com — Fri, 29 Jan 2016 21:00:00 +0000

Showing the REIT Way os@interactive… Jan. 29 2016

Ed Fritsch

Ed Fristch is the president and CEO of Highwoods Properties. He served as the 2014 Nareit chair.

Showing the REIT Way

The REIT Way advetising campaign will remain an important part of Nareit’s outreach program in 2016.

In May, Nareit launched an important industry awareness campaign, The “REIT Way,” to increase public education about REITs’ contributions to the investment portfolios of millions of Americans. The REIT Way also explains the role of REITs in creating jobs, revitalizing communities and growing the economy.

So far, the initiative has exceeded all expectations. In 2015, the campaign touched nearly 15 million people—primarily in Washington, D.C., and New York City—through digital and print advertisements. Nearly 5 million people viewed the accompanying REIT Way video, which vividly drives home the benefits of REIT investment.

The campaign broadcasts the message about REIT-based real estate investment, but Nareit member companies can also utilize REIT Way as an educational resource of their own. The REIT Way website contains in-depth information on everything from the rationale for the creation of REITs 55 years ago to the subsequent evolution of the industry to the contributions REIT’s make in community development. The campaign can also serve as a valuable tool for communicating with new audiences about the REIT investment proposition.

Similarly, Nareit’s website houses a wealth of industry data, news and analysis at the ready for investor relations professionals.

Offerings on Nareit's website include Nareit-produced educational videos on subjects ranging from the investment benefits of equity REITs to the role that REITs play in growing our national economy. The site also features real estate market commentary from Nareit’s staff economists. And if you’re looking for updates on the latest public policy developments affecting REITs, you can find them on REIT.com.

At Highwoods Properties (NYSE: HIW), we’ve made Nareit’s resources an integral part of our public outreach platform. In our experience, they’ve given us an effective way to help tell the REIT story. For example, visitors arriving at the main investor page on the Highwoods website will find a direct link to REIT.com. We’ve also incorporated Nareit videos into our communications with investors and employees.

REIT Way will remain an important part of Nareit’s outreach program in 2016. I hope it and Nareit’s other resources are part of yours this year as well. As always, I invite you to reach out to Nareit’s highly qualified staff for any assistance you may need.

Ed Fritsch

Nareit Chair

President & CEO,

Highwoods Properties, Inc.

A Changing Standard For REITs

os@interactivestrategies.com — Tue, 10 Nov 2015 21:00:00 +0000

A Changing Standard For REITs os@interactive… Nov. 10 2015

Ed Fritsch

Ed Fristch is the president and CEO of Highwoods Properties. He served as the 2014 Nareit chair.

A Changing Standard

Change will again be a major theme in our industry in the coming year.

With my term as NAREIT Chair beginning in November, I express my and NAREIT’s deep gratitude for the hard work of my predecessor, David Neithercut. David and other NAREIT Chairs before him have played key roles in helping guide us through changes in the financial markets, regulatory environments and culture at large. It is truly an honor to assume this role.

Change will again be a major theme in our industry in the coming year. At the end of August 2016, stock exchange-listed Equity REITs and other listed real estate companies are moving from the Financials Sector into a new 11th headline Real Estate Sector within the Global Industry Classification Standard (GICS). GICS frames much of the product development, investment research, media coverage, and investment strategies of both institutional and individual investors. As a result, REITs will command more attention from the investment community, along with greater shares of their asset allocations.

The changes to GICS demonstrate that 55 years after Congress created REITs, the industry has never been stronger. Public REITs now oversee approximately $2 trillion in real estate assets, and they are asserting themselves as best-in-class owners and operators of real estate across a wide range of sectors. From offices to warehouses to cell towers to hospitals to apartments, REITs continue to play a dynamic and integral role in supporting the U.S. economy.

REITs also have continued to provide strong returns and highly sought-after dividend income for investors. In addition, investors enjoy the diversification benefits that REITs offer to their portfolios.

The secret to the industry’s success is embedded within the REIT approach to real estate investment, which was once realistic for only a small class of wealthy investors. The rise of publicly traded real estate companies has turned investing in real estate into a viable option for anyone with enough money to buy one share of stock.

As publicly traded companies, REITs also operate with the discipline required by the public markets including sophisticated balance sheet management and high standards of corporate governance. The wisdom of that discipline is bearing itself out with a rise in interest rates now seen as a matter of when, not if. Solid market fundamentals and conservative capital structures have positioned REITs to hold steady in response to any gyrations in the capital and equity markets.

NAREIT spreads the word about all of the advantages of REIT-based real estate investment to a wide range of audiences in a variety of ways: constructive dialogues with policymakers; news and analysis through REIT magazine and REIT.com; outreach meetings with institutional investors; major industry events, such as REITWorld and REITWeek; and more. As the industry continues to grow and mature, we’re seeing the widespread recognition of NAREIT’s message.

We are fortunate to have a talented and driven team within NAREIT, a team which invests significant time listening to its membership. I look forward to the coming year and continuing to support all of the work NAREIT does to help the industry thrive.

Ed Fritsch
NAREIT Chair
President & CEO
Highwoods Properties, Inc.