SPG - The Time Is REIT Now

2024-04-02 05:46:41 ET

Summary

• REITs Prioritize Maintenance Spending: Public REITs prioritize maintenance capex, ensuring property upkeep and tenant satisfaction while minimizing investor risk.
• Divergent Capital Allocation Strategies: Public REITs emphasize long-term returns through property maintenance, while private equity models often defer maintenance for short-term profit, risking occupancy and tenant satisfaction.
• REITs' Competitive Edge: With ample capital and a focus on property upkeep, public REITs can seize market share by acquiring discounted properties burdened with deferred maintenance and high leverage.

One of the most important jobs of REIT executives and Boards of Directors is capital allocation. Depending on cost of capital, acquisition and development yields, and the point in the real estate cycle, a public REIT will have to employ different capital allocation strategies. One of the forgotten and often purposely swept-under-the-rug line items is maintenance capital expenditures....

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