Todd Briddell, Chief Executive Officer and Chief Investment Officer of CenterSquare Investment Management, outlines what it takes to be successful in global real estate investing
Todd Briddell, President and CEO of CenterSquare Investment Management, outlines what it takes to be successful in global real estate investing:
Meet with every management team to understand their asset quality, strategy, and other catalysts that drive value
Be an active investor. Model every company and search for relative value and mispricing
Be willing to overweight or underweight a market based on top-down conditions
Look at the second derivative--the rate of change of growth
Have a great team of analysts and train them well
Zell/Lurie: You run a global publicly traded real estate platform. How do you evaluate the risks and opportunities across different markets and different parts of the world? And what does one need to be successful in a global real estate securities environment?
Todd Briddell: At Center Square, we've got 20 years of investing in REITs and real estate securities. We have teams based in London and Singapore and here in Philadelphia. First and foremost, we meet with every management team that we invest in. So we have a very, very strong bottom-up process of meeting with the management team and actually seeing and walking a lot of real estate, so that we can get a sense from the bottom-up perspective of what management companies we like, the asset quality that a company might have, understanding their strategy and any catalyst that might be driving value at a particular bottom-up level, looking at an individual company.
The second thing is to be successful, you have to define what success is. Well, success from our perspective is we're an active manager. So we're actively managing a portfolio of REIT investments and we're doing so on behalf of large, institutional clients, with an expectation of beating a benchmark consistently. We've done that over the last 20 years extraordinarily consistently. And I think the reason is that we model every company and we're really searching for relative value. So there are opportunities where there's mispricing, whether it's because generalists push REITs around—but that identification of mispriced opportunities is one of the sources of alpha. The second is obviously looking at the management, understanding their strategy, understanding any catalysts and then looking at the properties.
From a top-down perspective, you're right, we look at things from a global perspective. And there will be time periods where we may make a decision to overweight or underweight a particular market, based on how we're looking at things from the top-down perspective. So, for example, if we can find a market that has very relaxed, let's say "central bank policy" and monetary policy that looks dovish at a time period that we also think that the economics are growing, that might be a condition in which we would want to invest.
The key thing for us is looking at—and I think people will understand—the second derivative: The rate of change of growth.
So seeing China, for example, slowing from 10 percent to 7 percent and what may end up being down to 5 percent—5 percent's a better amount of growth on an absolute basis than just about anywhere in the world—but that rate of change, going from 10 to 8 to 7 to 5, is really having some significant negative effect. So looking at the second derivative is really, really key.
And then, I think the last thing is just making sure you've got a great team. We have a great team of analysts, we train them and we train them to look at and find relative value and find those mispriced opportunities. It takes a tremendous amount of training for them to be able to do so.