As published in Scotsman Guide's Commercial Edition, March 2007.
As investors continue to accept institutional real estate as a mainstream asset class, the Pension Real Estate Association acts as that sector's voice. PREA's more than 500 member companies hold more than $140 billion worth of assets in equity real estate. Jim Clayton, the association's director of research, tells us more about the institutional real estate investment market.
What are PREA's primary goals, and who are its members? Our members fall primarily into three categories -- investors, investment managers and consultants who advise the pension plans. The primary goals are education and research. Each year, we put on two main conferences and the annual PREA Institute, in which we partner with a university to hold a two-day educational program.
As the investment world becomes more global, how is PREA responding? PREA is establishing relationships with similar firms in other parts of the world. We're trying to learn the concerns in different parts of the world because we have U.S. investors who want to invest overseas.
What has been some of PREA's most-noteworthy research? In 2006, PREA funded an international comparative study of pension plans and real estate investments. Last year, our research also focused on the cost of toxic mold on real estate values, how Federal Reserve Board policy impacts investors and insurance coverage for Hurricane Katrina losses.
How does PREA collaborate with other real estate finance organizations? I'm working with my counterpart at the National Association of Real Estate Investment Trusts to explore how we can exchange information. And PREA works with the National Council of Real Estate Investment Fiduciaries to try to meet real estate information standards. We want to ensure there is standardization in reporting in the real estate world to help make it as transparent as possible.
What are some current issues and trends you see in commercial real estate investment? Loans are all becoming cut up and securitized. That evolution is continuing, and the commercial real estate derivatives market continues to develop. Another issue is: How long can real estate investment trusts (REITs) earn 30 percent a year? Further, many people are concerned about REIT privatization. But while there may be more privatizations, I don't think the REIT market will disappear. We now have REITs around the globe in roughly 20 countries set to take off. One more trend is the move by some pension funds to venture beyond the four core property types into infrastructure and related investments.
What should commercial mortgage brokers tell clients about PREA? Institutional-investment-equity money has become an important part of the capital structure for many developers, so understanding how institutional investors work and see the world is a smart move.
Melinda Young is an associate editor at Scotsman Guide. Reach her at (800) 297-6061 or email@example.com.