With 2019 firmly in the rear view, REITs can celebrate an excellent year, rebounding from a tough 2018 perspective, however, that’s yesterday’s news. REIT management and IR (investor relations) teams need to be focused on a host of questions that analysts and portfolio managers are wrestling with as we turn the calendar and, more importantly, anticipate the critical issues that could drive investor interest and sentiment going forward.
At Alpha IR Group, we specialize in helping our partnership clients navigate the challenge of focusing on the future, while communicating with investors in the present. Dealing with the inevitable mismatch of these time horizons and establishing effective communication that engages the investment community on today’s issues and tomorrow’s uncertainties is our focus every day.
Below we have provided a partial list of what we believe are among the more pressing issues REIT IR teams will have in the coming year. Your IR program needs to be prepared to address these questions as you pull together your strategic IR plans for 2020:
- You Will Lose Sell-side Analysts in 2020. The sell-side remains extremely challenged and even bedrock industries, like financial services and energy, just saw numerous layoffs over the last seven weeks. As the gatekeeper for your Company’s IR program, you need to prepare your board and management team for the inevitable loss of sell-side analysts (especially if you are under $2B in market-cap) and be prepared to drive your own investor visibility in the future.
- Anticipate and Plan for Shifting Allocations. Allocation shifts across sectors within the broader REIT universe are expected year-to-year, as managers trim or sell overweight positions and reallocate to underperforming groups. This shift will take place at both the sector level and within REIT sub-groups. As with any company or sector, we believe it’s critical for IR programs to be proactive and anticipatory regarding potential shifts in their shareholder base. It’s critical to run regular diagnostics of your shareholder base to better identify “at-risk” holders and reach out to new potential investors through a targeted methodology. Utilizing a mix of quantitative and qualitative factors, Alpha IR develops company-specific target lists that are designed to raise the ROI of the C-suite’s time when meeting with investors.
- RIA’s, Under-Recognized Winner in Rapidly Changing Investment Landscape. Tremendous and accelerating changes are taking place within the institutional and retail asset management business and this dynamic will continue in 2020. One of the somewhat unheralded winners of this shift is the U.S. RIA (Registered Investment Advisors) industry, an early, dedicated and structurally focused group for REITs. This has clearly been a tailwind for past performance, and we expect this to continue in the future. With that said, targeting this group of investors is a bit trickier as they are highly fragmented and historically harder to reach. This is changing, however, with the growth of RIA aggregator firms, some of which are now publicly traded. At Alpha IR, we are already in touch with a number of these firms and have worked directly with most.
- Technology – Friend or Enemy? Opportunity & Risk Around Investments. The synchronous value of technology is accelerating across all workplace environments, reshaping tenant preferences and presenting REIT operators with significant opportunities, while simultaneously escalating the risk profile of those owners that fail to invest. Prioritizing the user experience has always been important, but the emerging and fast-moving adoption of technology around data collection, analytics and cyber security goes beyond key historical determinants such as location, comfort and price. The risk, or protection, element around data is growing rapidly and investing in these areas can not only protect existing revenue streams and underpin rate raising ability, but also open up potentially significant new revenue streams. From an IR messaging perspective, highlighting these investments and this differentiation is important when meeting with investors, as this group increasingly recognizes these investments could drive higher absolute and relative returns in the future.
- Taxes – Could Future Changes Benefit REIT’s Position with Investors? Tax policy remains a point of consternation among legislators. Could capital gains and federal income tax rates be raised in the near future? What if the corporate tax cut of 2017 is reversed? Even rampant share repurchase activity has recently drawn political ire. Such tax policy changes could leave dividends as the guarded class of income through the lens of political tax hierarchy. If so, this would tend to favor REITs and even help your program start to attract more “generalist” investors. Legislative-driven changes affecting important areas such as corporate taxes are generally outside of any companies’ control. However, from an IR perspective, we think it is useful to proactively identify important macro topics that may heighten investors’ interests and frame how those issues may or may not benefit the company.
These are important macro and micro issues, to say nothing of company-specific factors that investors are currently focused on and will be going forward. The role of IR at all public companies is growing in sophistication and need, with a corresponding increase in risk associated with perceived and actual communication missteps amidst a fragmented institutional and retail money management business.
About Alpha IR Group:
Alpha IR Group is a full-service investor relations consulting firm that partners with companies to deliver best-in-class investor relations, from strategic insights to daily, tactical execution. Alpha IR offers a range of tailored programs, as well as sophisticated insights and significant experience with activist preparedness, investor day preparation and execution, earnings support, M&A/transaction support, perception studies, and more. The firm’s leaders have over 100 years of combined sell-side, buy-side, investment banking, and IR consulting experience. The firm has offices in Chicago, New York, and Boston. Alpha’s growing staff supports a client base that spans seven industry verticals and represents nearly $100 billion of equity value trading on public exchanges in North America.