Riding the REIT Recovery Wave

If we sit back and be thoughtful, and look at valuations - particularly relative valuations of real estate versus the broad equity indexes, we are at some of the most attractive relative valuation levels that we've seen since the GFC. So that, combined with the fact that we've had years of underperformance versus the broad equity market, the fact that the valuations looked very attractive on a relative basis really gives us a lot of optimism and confidence as we move into 2025 and 2026.

When you think about higher for longer and you look at that in real estate terms, one of the things that that can translate to is if rates stay a little bit elevated for longer, you also have real estate earnings growth higher for longer, meaning that if rates are up due to pro-growth, what you'll see reflected in real estate returns, as long as supply is not an issue,

Now that we're through the uncertainty of the election, we're starting to see what policy looks like. We will start to see perhaps some stabilization in rates and, you know, further cuts as well all of that. I think this really results in a quite an attractive backdrop for rates as we look forward in 25 and 26.

We've seen a little bit of a slowdown, but we still anticipate again once we get stabilization in rates and rate volatility comes in, we expect to see a very active year for real estate M&A. We saw three deals last year and you can see the opportunity there that the menu of opportunities, the excess returns, really sit in the listed space. So we know there's a lot of private equity shops out there with a lot of money that they want to deploy. They're looking at listed as a menu of opportunities to deploy capital and generate excess returns.

We're not just growth at any cost. We're really looking for opportunities where I can find good earnings growth at a reasonable price. And we're finding that a couple areas. The population is aging. The baby boomers are hitting their 80s. And that is the high usage demographic for assisted living. So we're really seeing demand uplift occur. We're seeing costs in assisted living wage inflation for health care workers come down. And that's resulting in 20% type same-store net operating growth.

Data centers, we still like, the demand trends there are very strong. And when you look at supply in particular, you have really limited, development opportunities due to access to power. Now, we've all seen the headlines on DeepSeek. What DeepSeek has done is accelerated the usage or demand for a lot of AI applications and movement to the inference stage, which does require a lot of power. So if we are a bit more efficient on the learning side of the AI, equation for big hyperscale type data centers, the co-location type data centers will be big beneficiaries.