Heitman LLC is a global real estate investment management firm with approximately AUD $59 billion in assets under management. Heitman’s real estate investment strategies include direct investments in the equity or debt capitalization of a property and in the securities of listed and publicly traded real estate companies. Heitman serves a global client base with clients from North American, European, Middle Eastern and Asia-Pacific institutions, pension plans, foundations and corporations and individual investors.
"This team system promotes higher-quality decision making": Q&A with Heitman's Beau Titchkosky March 2019
Beau Titchkosky joined global real estate investment management firm Heitman as managing director, client service and marketing for Australia and New Zealand in August 2017. He talks to Industry Moves about the recent launch of the Heitman Global Prime Real Estate Trust in Australia and why Heitman believes it is more important than ever to be benchmark unaware. He also explains how a team approach and group discussion are crucial in removing individual bias when it comes to security selection.
- What is Heitman's outlook for the global real estate security markets for 2019?
Our outlook is little changed from the prior quarter as we look around the globe at real estate fundamentals and see a continued positive environment, with job growth driving demand, and supply remaining at, or below, long-run averages in most sectors and cities.
We expect a slowdown in economic growth in 2019 compared to 2018, but it should remain at levels we have seen for much of this cycle. This should support property values, but where stock prices are not rising in tandem, we expect to see management teams look to M&A and other methods to create value to close the gap between public and private valuations. That theme continued again this quarter and further M&A is expected as long as property stocks trade at a discount to private market valuations.
- Do you think there will be a rotation into real estate securities from fixed income assets such as bonds and cash this year?
Real estate yields continue to offer an attractive spread to global bonds. With central banks continuing to maintain historically low yields, we believe real estate securities offer an attractive alternative to bonds or cash.
- Are there any sectors, regions or countries you are overweight (or underweight) at the moment?
Our Prime strategy is benchmark unaware and rules based, so we are not making calls on overweights or underweights of the many sectors. The result of the Prime’s screens creates a portfolio consistently and entirely of the opportunity set of prime quality companies. One thing to note, though, is that we limit the property types to the core sectors of office, logistics, multi-family, retail, and hotels. We exclude specialty property types that don’t have the long-term track records to be considered core.
- Do you invest in Australian real estate securities?
Yes, there are currently 5 Australian stocks in Prime: Vicinity, Goodman, Scentre, Dexus and GPT.
- You have a long history managing global real estate securities in the US, what kind of advantage does that give you over your competitors?
We believe the combination of the following factors allows for the creation of superior alpha and helps differentiate us from other real estate securities managers:
• True bottom-up information advantage - Heitman is a real estate investment management company that invests globally in three areas: direct property ownership, public real estate securities, and real estate debt. Having investment professionals on the ground around the globe working side-by-side gives the securities team fundamental insight and industry contacts, making us superior to other equity managers. These complementary businesses allow for an information exchange that helps us stay abreast of changing conditions in all areas of real estate. We then use this proprietary information to create and manage innovative strategies, resulting in superior performance for our investors.
• Team approach with an aligned ownership structure - Heitman’s investment portfolios are managed by regional investment teams. This team system promotes higher-quality decision making, as the pros and cons of various opportunities are debated, decreasing the likelihood of individual bias. We believe that by broadening the decision making process, we broaden the knowledge and information used to create superior performance for our clients. Further, as an employee owned and controlled firm, Heitman’s interests are always aligned with delivering the best investment performance to the clients.
- Why do you believe it is important to be benchmark unaware?
Benchmarks often have very simple rules for inclusion, so they can sometimes include undesirable companies or property types. Our Prime screens are designed to isolate just those companies with the highest quality assets in the biggest markets in the world.
"Benchmarks ... can sometimes include undesirable companies or property types."
- What do you think will be the next big thing in this asset class?
More incorporation of climate risks into underwriting and managing real estate assets. In collaboration with the Urban Land Institute (ULI), Heitman recently published a report titled “Climate Risk and Real Estate Investment Decision-Making". This report explores current methods for assessing and mitigating climate risk in real estate and highlights proactive measures Heitman and other leading firms are taking to accurately price risk in to investment decisions.