An Interview with David Auerbach, Institutional Trader, World Equity Group

An Interview with David Auerbach, Institutional Trader, World Equity Group

An Interview with David Auerbach, Institutional Trader, World Equity Group. In this interview, Andrew Dick interviews David Auerbach, Institutional Trader, World Equity Group. Andrew sits down with David to talk about trends in the real estate investment trust (REIT) industry.

Podcast Participants

Andrew Dick

Attorney, Hall Render

David Auerbach

Institutional Trader, World Equity Group

Andrew Dick: Hello and welcome to the Health Care Real Estate Advisor podcast. I’m Andrew Dick, an attorney with Hall Render, the largest healthcare focused law firm in the country. Today, we’ll be talking with David Auerbach. David’s an institutional trader at World Equity Group. He specializes in real estate investment trusts or REITs, preferred stocks, close end funds and ETFs. He’s well-known in the REIT industry for being a thought leader, mentor and commentator on trends in the industry. Today, we’re going to talk about healthcare REITs, other REIT product types, the industry in general, and some of David’s other interests. David, thanks for joining me.

David Auerbach: Thank you for having me. I really appreciate it.

Andrew Dick: David, before we talk about your current role at World Equity Group, let’s talk about your background. Tell us where you’re from, where you went to college and what you aspired to be.

David Auerbach: I’m born and raised in Dallas, Texas. With the exception of the four years that I spent at the university of Texas at Austin, welcome Horns, I have found myself back in my old neighborhood. I did spend a couple of years going to Southern Methodist University in their grad school program at night. I have spent my entire career here in good old big D.

Andrew Dick: After you got out of college, you ended up working as a financial advisor. It sounds like you’ve always worked in the equity space, but talk about your first job out of college.

David Auerbach: Sure, so to rewind further than that growing up, I was always fascinated by Wall Street, watching CNN in the early days, learning about Warren Buffett, reading the Wall Street Journal when they used to publish stock tables on the paper. I was just drawn to it at such a young age. My parents love telling the story like six, seven years old kids are up watching cartoons and I’m watching business news just to watch the ticker. I knew at a very young age that I wanted to go down this road.

David Auerbach: I graduated from UT and joined up with a local practice, a CPAs financial advisor, where he my boss was a certified public accountant. He had a book of Wall Street clients. As a result, he brought me on. He helped me get my licenses. It was a great foot in the door to learn about the business, learn about the retail network.

David Auerbach: From there, I went to a firm called Green Street Advisors, which had their trading desk based here in Dallas. Green Street is and was considered the preeminent research firm in the country. I was very privileged to learn from some wonderful mentors, people that I’m still in touch with to this day, that they really paved the way for my entire career. The running joke with that job is that the day I started in March of 2000 was the day that the market rally officially ended. Every couple of years I’ll get an email from my former boss, just like, “You know my portfolio took a hit that day that we hired you.” I’ll never forget it. I spent about 11 years working at Green Street, just under 12 years. It was just a great spot. I’m still very close with a lot of people. It made me the trader and person that I am today.

David Auerbach: From there then I went to a firm called Esposito Securities here in Dallas. I was working on a relationships, the ETF universe. From there I’ve found myself now working with World Equity Group. I’m also working with a partner on some consulting in IR type information. We’ll get into some other things, but it was really that Green Street got me my start in this career, and I’m very lucky.

Andrew Dick: David, what does it mean to be an institutional trader for those listeners that may not be familiar with that title?

David Auerbach: Sure. That’s a great question. I do get that question very often. Institutional trader would be somebody who would talk to a family office, a hedge fund, a mutual fund, a bank, a pension plan, some type of big institution that would have multiple millions of dollars under management or more. You have to qualify to be an institutional investor. There’s various check boxes that a firm would fill out. It’s different than a typical retail broker advisor who would be dealing with what I call the mom and pop investors. Whenever I recommend a company or I’m talking about something, I always refer to the mom and pop in Missoula, Montana. That’s where I always fall back onto Missoula, Montana. It’s a whole different audience. There are high net worth individuals that can qualify under some of the accredited investor, institutional investor check boxes, but traditionally it’s firms that that’s what they manage as an institutional advisor.

Andrew Dick: Got it. When you’re making purchases or selling equities, these are presumably high, big dollar amounts we’re talking about lots of shares, not the retail investor.

David Auerbach: There are some retail investors that do trade that kind of volume, but yes, that is correct. There would be big size orders and on behalf of those guys. Correct.

Andrew Dick: Got it. Okay, so David, just to provide some more background, I met you a couple of years ago. You’ve been a great resource for me and for many others. I think, I found you because I had heard you speaking on one of the Nareit podcasts where they had an update a couple of years ago. Just want to thank you for all the information you share with the REIT community and just a great resource. If you haven’t met David, he’s always willing to help. We will talk a little bit more about that here in a little while. David, we appreciate your thoughts.

Andrew Dick: Let’s talk about the healthcare REIT industry, because that’s really the space that I work in and that’s what our audience is primarily concerned about. We’ll hit on that, but we’re going to dive into some of the other REIT asset types. We just finished the third quarter earnings report for, I think, just yesterday or today was one of the last healthcare REITs reported. I saw that one of the REIT analysts just send out a note about national healthcare investors.

Andrew Dick: Let’s talk about the big three David. When we talk about the big three that’s Ventas, Welltower and what is now called Health Peak. Those are in my mind, diversified healthcare REITs big players in the space with really different models in some cases. Give us a flyover of your perspective of those REITs today. I know we’ve talked in the past about Ventas and its CEO. She’s really dynamic. She’s tough. I have no doubt that she’s going to make Ventas perform very well after we come out of COVID, but give us your thoughts, David.

David Auerbach: Sure, so first from a very high level perspective, I’ve been out on record and I will probably until the day I die, I will say that the healthcare REITs is the only sector that I can think of that will literally make money off of every single American or any individual whatsoever at some point in our lifetime. No matter how you look at it, some kind of healthcare company is going to make money off of you. Whether you have to go to the hospital, the doctor’s office, a medical office building to see a doctor, rehab, sadly, hospice, end of life, assisted living, senior housing. There are so many different segments of the industry that as a whole, the healthcare REITs combined will make money off of every single one of us. I always ended it with as they always say, “Do you know who’s undefeated in sports, don’t you?”

Andrew Dick: Who’s that?

David Auerbach: Father Time. And so I’ve [inaudible 00:08:26] Father Time, hate to say it, we are several minutes older than we were when we started this conversation. As a result, that’s why I’m such a big fan of these companies. Ventas, Welltower, good old HCP, or now Health Peak, as you comment, they are the big three. They’ve been around for so long. They run such effective companies. They make money off of every single American. What’s really interesting when you look back at when COVID started, the one industry that took a hit right off the bat was the healthcare REITs, because of them finding the cases in some of the senior housing communities.

David Auerbach: The talk from the sector has been, “Okay, this happened. How are we going to address this head on, face the pandemic inside our communities, and then deal with the aftereffects coming on the other side?” Well, we’re not out on the other side, but what did we learn from earning season? It wasn’t as bad in the third quarter as it was in the second quarter and as it was towards the tail end of the first quarter. These guys have expected to have occupancy declines this year. I was just reading the Welltower release record as we were getting on the air here, and I think their number, their shop occupancy came in down like 125 basis points, but they were projecting down 125 to 175. If you’re coming in within your expectation, it’s almost like a win in itself.

David Auerbach: If you remember going back, putting on your hat from like 10, 15 years ago, when companies would announce earnings, remember, there was always two numbers. There was the first call estimates, and then the whisper number. Remember the whisper number If you did, it was one thing to beat the first call. That’s nothing, but unless you beat the whisper number, that’s what everybody focused on. Well, for the healthcare REITs, it seems to have been over the past couple of quarters. It’s not everything that they’re doing. It’s what’s the number of the occupancy, looking at their same housing occupancy numbers, shop. If they’re able to come in at, or within a certain range or better than then that’s a win. You’re noticing that happening.

Andrew Dick: David, we’ve talked before about the big three different strategies, a lot of new headlines over the last couple of weeks. One in particular you and I were just talking about is a Health Peak, formerly known as a HCP, moving its headquarters to Denver. They were looking at Dallas …

David Auerbach: Correct.

Andrew Dick: … and Nashville. Then they ended up in Denver. Health Peak’s also been in the news because their strategy has, they’ve given more emphasis over the last couple of years on life sciences properties. Then they’ve announced that they’re going to start disposing of a large volume of senior housing assets. Maybe you could give your thoughts on Health Peak, and then we can talk a little bit about Ventas.

David Auerbach: The Health Peak news is really interesting to me. I remember when they rebranded to Health Peak from HCP just a couple of years ago, not even a couple of years ago now. People were scratching their heads trying to figure out what’s Health Peak. I don’t quite understand. Now, as you just mentioned with them announcing this big senior housing portfolio disposition, as well as moving their headquarters, this is a massive corporate and strategy shift that the company is undertaking. There’s good healthcare companies that are out there outside of the big three, thinking about what Health Peak focuses on. Then you have guys wide Omega Health, OHI, Medical Properties, MPW, where there’s guys focusing on the hospitals, there’s guys that are focusing on the medical office aspect of it.

David Auerbach: I commend Health Peak for making this change. Obviously, a lot of people are taking advantage of good relocations. I mean, Colorado has seen a massive inflow of folks recently, and so what a great place to consider building your headquarters. Everybody is relocating to Dallas too, of course. Texas has very far favorable property taxes and no state income tax. I think if you’re noticing here that this, I don’t think their strategy shift is done.

David Auerbach: I think this is just another step of things that they’re trying to evolve into, because one of the things that I love to talk to you about, and I always pester you about this is talking about Father Time, the nursing home today is different than the nursing home that our grandparents were in. Frankly, what we are going to move into down the road is going to look different than what we see today. I’m curious, thinking about the next generation. I know we’re going to talk about some more of this down the road here in a little bit, but thinking about how we are so technology oriented today by way of our cell phones, are iPads and all this other stuff. How is that going to be implemented and integrated into the nursing home of the future? How is that going to be implemented into the office building, the medical office building that we walk into into the future?

David Auerbach: I think that one of the things, and I know we’re going to talk about Ventas and the life science space and the lab innovation, but I think that just like a lot of companies, like McDonald’s has their test kitchen, I think some of these other guys have, like the hotel REITs, just to shift gears. A lot of the hotel companies like Marriott and Hilton have a lab set up on their campus where they’re working on future innovation. This is what the hotel room of tomorrow is going to look like. This is what the office building of the future is going to look like. I’m pretty sure that some of these guys and their HQs as well, I think they’re trying to figure out what’s the healthcare property going to look like 30 years from now, 20 years from now, because a gen seer who lives pretty much behind the screen, 24/7, they’re going to expect that to be implemented in their daily lives at the next chapter where they move into. These are the things that keep me up at night.

Andrew Dick: Yep. Nope. All good points. You mentioned nursing home you’re right, LTC, Omega, really good companies, what I consider more of a pure play, long-term care REIT. Talk about Ventas, because I know you really like Ventas in the sense that Debbie is a dynamic CEO and just seems to provide really great leadership, and the company historically has done very well.

David Auerbach: You summed it up great. Because when you look, as far as leaders are concerned, Debbie is always one of the first people that is always mentioned. When I was growing up in the industry, and I believe they still do today, her nickname was Diamond Debbie, because everything that she touched, turned to gold. Debbie is so well-respected, and more importantly, she’s such a nice person. I remember talking to her at a conference so many years ago. I went up to her, and I was like fan boy around her, gushing. She’s like, “Stop, just quit it. I’m a nice person.”

David Auerbach: I joke, but in all seriousness, when you achieve the status that Ventas has achieved, when you’re as big as they are, when you’re in the S&P 500, when you’ve earned this cachet, it says you’re doing something right. Thinking about how the company has evolved just in the past 20 years that I’ve been following it, they’ve done one, I want to say two or three public mergers you may may know better off top of my head, but I think three public mergers.

David Auerbach: They’ve now going towards some of these life science deals, like the big joint venture that just announced with the government of Singapore last week, with what they’re doing with One Use City in Philadelphia, I believe it’s in Philly, and some of these other places, they’re looking at the next step as well. You’ll know, it’s like Boston properties, which is an office REIT, announced this big, huge lab space deal just a couple of days ago in Waltham, Massachusetts. Alexandria who is considered to be the pioneer of life science and lab space, they’re always in the conversation.

David Auerbach: Ventas has made such a push over the past couple of years, that this is a big shift. It’s not just, we’re going to operate a bunch of communities and hospitals. They’re focusing on again, the development side of things right now. One of the other, thinking about REITs and how office REITs and healthcare REITs and where they’re in space together, it costs a lot more to build one of these properties because of the sterile nature of lab space and the white glove, white coat, wearing the hood and everything that these guys and the walls. Think about Homer Simpson where he puts his hands on the gloves to do, that’s what these guys are building.

David Auerbach: As a result, the fabrication costs of these properties are so expensive. But remember, and we’re going to talk about this in some other sectors in a little bit, who do you think pays for that stuff? Ventas is the one building the property, but guess what? That costs is going to be passed off to the tenant that’s moving in there. They’re already inherently able to charge an additional premium on the states, because they’ve gone to this effort to build out a white coat lab facility.

David Auerbach: As Debbie’s, she owns a piece of the Pittsburgh Penguins. I’m a Dallas Stars fan. I can’t blame her. Pittsburgh’s got a good team. Thinking in terms of hockey, one of the great expressions is don’t watch where the puck is, watch where the puck’s going. Keep your eyes on where the puck is going to be. That’s what they’re doing. They’re literally trying to stay ahead of the puck. This is one size matters, when you have a pretty stellar balance sheet, when you’re, I have to pull up the rate. I’m guessing they’re pretty highly rated. Your cost of capital is very small. You can go out and get 30 year money for pennies on the dollar for some of these guys and use that to build these properties that are going to be effective 20, 30 years down the road. It’s a really interesting story. Again, how can anybody not trust what she’s trying to do? That’s my opinion.

Andrew Dick: Yeah. One more, I agree, David. I agree. All good points. Let’s talk about Welltower real quick, and then we’ll transition to some of the other sectors. Welltower had a change in CEO. Tom DeRosa stepped down. The chief investment officer was promoted to CEO. Any thoughts there or how the industry reacted? Tom had been around for a while. Welltower, I think has performed over a long period of time. It’s performed pretty well. Big company. They seem to be more interested in finding senior housing opportunities when you compare that to Ventas or Health Peak. Any thoughts on Welltower before we transition?

David Auerbach: You brought up a really good point about the transition, because Tom was so well-respected. A lot of folks were speculating, “What does he know that we don’t know? Why now? What’s happening?” Mr. Mitra has been around for so long, as you had mentioned, that because of his experience, it’s a natural transition. It’d be one thing from them to bring in somebody from the total outside that had nothing to do with the company. When it’s really next up on the bench to take over, it’s not like they’re changing their strategy shifts. As you know, they also did a huge outpatient facility disposition right at the same time.

David Auerbach: This is a little bit similar to what Health Peak was doing is they’re shifting their strategy a little bit, but they’re rebounding. As I mentioned, their occupancy came in within their target people are watching, and so the question that a lot of these folks have to answer, whether you’re a retail investor listening to this podcast or an institutional guy, but the big picture that remains, and I asked you, “What’s your definition of longterm?” When I was growing up in school, when I was taking finance classes and everything, we were taught that the longterm would mean your retirement money. You’re 18, 19, 20 years old sitting in your first classes. When they define longterm, they’re talking 50 years from now, okay? If you talk to a gen Z kid, that’s coming out of college today, that’s 22, and you asked him what his definition of longterm is, two years, maybe five years. Their timeframes are different.

David Auerbach: I ask the person that’s listening to this podcast today, “What’s your definition of long-term.” If you’re thinking about something many, many, many years down the road, then I leave you this question of thinking about Welltower and what they do and their properties, thinking about Ventas, thinking about Health Peak. It’s not what’s happening today with COVID, it’s what is this going to look like 10, 15, 20, 30, 50 years down the road.

David Auerbach: Now you want my take. Here’s what I think. There’s a reason why you’ve got the big three and a lot of the other players that are out there, Capitol senior, you mentioned LTC, Genesis, Brookdale, some of these other operators that are out there. When you have so many companies that make up the sector, I was always taught to think one thing, the big get bigger, the small get smaller. In a universe that probably is dominated by an 80/20, 90/10, and they know what that means, where 20% of the folks control 80% of the properties or more, It means that these guys are going to continue to acquire their smaller competitors. If you, we’ll use Ventas as the example, as I mentioned, I think they’ve done two or three public mergers, but maybe more. When Ventas wants to grow, they’re not just going to go buy a property or two, they’re going to buy a company to grow.

David Auerbach: I think these guys are, Welltower helped pick these guys. The big three are doing a good job driving down their lanes of a highway, knowing what they know so well, that it’s pretty much everybody trying to get in their lanes. Because of their size, they can just muscle them out. I think it’s going to be really interesting to watch, especially as we get older and as this industry shifts. As we move on, I will say again, keep in the back of your head, medical office buildings, senior housing facilities, the rehab facility, drug rehab, a hospital for your x-rays, unfortunately for your end of life and your hospice care final living days, the healthcare REITs are the guys that are making money off of every single one of these people. That’s you. That’s me. That’s my mother and father, my grandmother, my grandfather, my brother, my sister. Every single one of us is going to be paying money to these guys.

Andrew Dick: Yep. Good point, David. Let’s switch gears. You and I have talked about other REIT sectors before. Give us an idea of what’s happened over the last six or eight months as a result of COVID. I mean, we’ve all heard or read the headlines about the retail sector. It’s taken a beating. You and I have talked before about companies like Simon Property Group, which happens to be headquartered here in Indianapolis, where I’m at. The company in my opinion is really well ran, has some of the best properties in the world. I think once we get through COVID, it’s going to be just fine. Give us your take.

David Auerbach: I have the most respect for David Simon of Simon Property Group. You will never hear me say anything bad about him whatsoever. There’s some great, great, great stories that go under the radar in COVID right now, because as you mentioned, everybody focuses on the work from home situation, so therefore, the office building is dead, what they read about with JC Penney and Sears and some of these retail closures and the mall is dead. Now, everything, obviously there is an asterisk pre-COVID, post-COVID. We all understand that. Let’s take a couple of different sectors at a time and we’ll hit on some different points.

David Auerbach: Okay, first things first, you and I are doing this podcast on the web today. I’m looking at you. You’re looking at me. I hear you. You hear me. This is all being run through data centers and cell towers. Data center REITs and cell tower REITs have been two of the best performing sectors this entire year. We’re all Zooming using cell towers. As a result, these are the guys that are benefiting the most from that.

David Auerbach: Take it one more step. Okay, I don’t know about you, but my wife and I, we love this little tiny website called Of course, it’s great. With Prime they deliver within the hour. It’s awesome. The thing about where all that stuff is stored, all that stuff stored at big industrial warehouses that are owned by a bunch of REITs. Another sector that’s done amazingly well this year is the industrial REITs, because Amazon, Walmart, Target, all these guys have these big, huge warehouses that store their products and their properties.

David Auerbach: You mentioned retail, Simon. Okay, so Simon has been very active this year. They just had the earnings a couple of days ago. It’s a great transcript to read. If you haven’t, I highly suggest you read it. David’s really tapped into what’s going on. What Simon’s been doing, they joined up with a company called Authentic Brands. They have been going out and acquiring a bunch of retailers this year. People were like, “Why? Why are you buying JC penny? Why are you buying Lucky Brands and Brooks Brothers? What is the benefit there?”

David Auerbach: The answer is there’s a variety of reasons. The big 10,000 foot version of why they’re buying this, think about how much real estate a JC penny owns at a property as an anchor tenant. I’m just going to throw a number out there. Let’s just assume a 50,000 square foot box. It could be less. It could be more. But let’s just use a random 50,000 foot number. Why is this important? Okay. Simon will be more than happy to buy a 50,000 foot empty vacant box and then do a couple of different things. We can bring in a new tenant that’s not around there right now. One of the questions that they got asked on their call was about a joint venture they have that [inaudible 00:27:11] talked about called Allied Esports. Allied Esports is an e-sports arena that kids or folks can go and watch people play video games, participate in some of these games. Instead of watching on Twitch or on one of these online platforms, it’s a way to draw traffic back to the mall, the millennial generation, back to the mall.

David Auerbach: If that doesn’t work out, Simon would be more than happy to spend some money and taking that 50,000 foot box and breaking it up into a 20,000 foot box, another 20,000 foot box and a 10,000 foot box. Now you can bring in three other tenants to make up one space. More importantly, in the call, they mentioned that they’re signing more leases right now during COVID on the look out through on the other side here that it’s, they call it the Warby effect, the Warby Parker effect. Are you familiar with the term called showrooming?

Andrew Dick: Uh-uh (negative).

David Auerbach: Have you heard the term showrooming? For those that don’t know showrooming is I’m going to go to the store. I’m going to look at the product. I’m going to play with it, touch around with it, but then go home and order it online. I’m not going to buy it in the store. It used to be very frowned upon. It killed Circuit City. Best Buy took a big hit form it. If you go back and read some of their transcripts in the early 2000s, they talk about this showrooming effect.

David Auerbach: Well, now the Simons of the world and some of these other retailers have said, “Okay, you know what? People are going to be people. They’re going to do what they want to do. Instead of shunning it, let’s embrace it.” A perfect example of that was Tesla. If you recall, Tesla built dealerships in these malls, but you couldn’t buy the car there. You had to go home and do the process online. They put it there for you to showroom it. Come check it out, come press the buttons, come hear the engine roar or not roar exactly, and then go home and buy the car online. These guys at Simons of the world said, “You know what? Go ahead, Warby, go ahead and go to a store here. Don’t make any sales. We don’t care. You’re going to pay us rent. Then you have a chance now to expand your footprint.” I think that you’re seeing the shift in the retail landscape of the bricks and mortar enhances their online component. I’m a big fan of what’s happening in the data centers and the towers.

David Auerbach: I’ll give you one more statistic before we move on to a different sector. The former CEO of American Tower, his name is Jim Taiclet. He went off to a company called Lockheed Martin. He’s looking out for your defense. Jim had a great quote a couple of years ago at a conference I was at. I use it in every interview, because it staggers me. There’s 24 hours of content posted to YouTube every minute. That stat’s a couple of years old. If you assume things only go up, let’s say that number is now 28 hours or 30 hours. That’s a lot of content. Where is that being stored? It’s in this thing called the cloud. It just floats above us. In all seriousness, it’s housed in data centers in servers and racks and all these buildings across the country. That’s run by data center REITs, Digital Realty, Core Site Realty, Cyrus One, QTS. There’s several publicly traded data center REITs.

David Auerbach: Another interesting way to play it’s through the ETF space. If you play exchange traded funds, if you don’t know what an exchange traded fund, I call it a publicly traded mutual fund. You can buy a basket of tower and data center REITs. There’s two products out there. One is run by a company called Pacer Benchmark, the ticker is SRVR. It’s the data center and server or tower infrastructure ETF, and then Global X, which is another very large ETF issuer, just launched one a couple of weeks ago on their tickers VPN, how appropriate Victor, Paul Nancy. These are just some interesting ways to potentially play a couple of different spaces.

David Auerbach: One more sector that’s getting a lot of coverage right now is cannabis. There are several, there’s one publicly traded cannabis, [inaudible 00:31:19] pure play, and that’s Innovative Industrial, IIPR. You’ve got a couple other companies that are trying to get their foot in the door, try to grow in the warehouse side of the cannabis space. You have a big candidate. One of the first SPACs, the special purpose entities, focusing in REITs was just filed a couple of weeks, just launched a couple weeks ago. It’s involved in the cannabis space. The company’s called Subversive. You’re seeing, one of the questions I always ask when I get to talk to the analyst or the company is this, “What’s the next sector? What’s the next industry?” If you go back 10, 20 years ago, nobody would have talked about towers and data centers. If you go back 10 years ago, nobody would have talked about cannabis REITs. Now, the question becomes, “What’s the next sector?”

Andrew Dick: David, those are all good insights. You and I have also talked about some of the more novel or niche REITs that we’ve seen. One in particular, Safehold REIT, relatively new REIT that plays in the ground lease space. It’s performed very well. How do those fit into when you’re looking at the REIT industry overall? I mean, I think it’s a very interesting company.

David Auerbach: I love Safehold. I love the guys there. One of the things that I love about it is that it’s a unique play. If you look at a partner REIT, there’s 10 publicly traded partner REITs, maybe more. There’s 10 plus healthcare, 10 plus office, 10 plus lodging. There’s only one ground lease REIT that’s out there right now, and that’s Safehold. It’s an interesting story, because thinking about the Warren Buffet mantras and things that we grew up on, talking about, number one, being a first mover. They were the first mover to take advantage of this situation.

David Auerbach: Number two, building an island. When you’re out on an Island by yourself, and somebody has to literally, you build a moat around you because as a first mover, somebody is going to have to invest a boatload of capital to go and compete against you. Frankly, up in where they’re located and what they’re doing, there’s really only a handful of guys that can truly compete with them right now at this moment in time, that being Colony Capital and Starwood Capital. I know that they’re, I think they’re tiptoeing into it, but they are not diving into the effect that Safehold has done.

David Auerbach: Number three, they are backed by their parent company, iStar. Now that can both be good and bad. Why do I say that? A lot of the institutional investors in the REIT community sometimes shun the fact that it’s an externally advised company by the parents. Not that there’s necessarily collusion, but it’s not a standalone entity, because it could fall back on the parent to take care of it. But in the same breath, that’s not a bad thing because they can fall back on the parent, and also knowing that if they’re doing a deal, it’s because the parent is behind the deal. As an example, Safehold just did a secondary offering last night. They upsized the deals. It was in the market for two days. They were able to upsize it, but concurrently with it, they did a private placement to the company of a slug of stock.

David Auerbach: Rewind, going back to a COVID, Safehold was the first, one of the few companies and the first company to float a public offering during the pandemic. While everybody was on Zoom doing what you and I were doing now, they may actually get a secondary offering off on the table. At the time, the company, rightfully so, was so established that they were able to get a deal done like this in COVID right at the beginning stages of it.

David Auerbach: What’s interesting is that they have such a unique set of properties. It’s office. It’s lodging. There’s some apartment type stuff. The number one rule of real estate is location, location, location. A lot of the stuff that they’re investing is the intersection of Main and Main is what I call it. Because you have such good properties, with the way that the ground lease works, and I’ll give you the 10,000 foot. For those that don’t know the website to go check it out, it’s a safeholdinc, I-N-C, .com ( It’s a interesting story.

David Auerbach: A ground lease, what happens is pick a building. Let’s just use the Empire State Building, which is owned by a different REIT, but we’ll just use the Empire State Building. What Safehold does is they go to the guys that run the Empire State Building and say, “Okay guys, you own the building, we’ll own what’s below the ground. We’ll own the ground. You rent that from us. Upon the maturity of the lease in 99 years, Safehold will take possession of the Empire State Building.” What they’ve done is they’ve amassed quite a portfolio, above and below ground real estate, that they own, when they talk about their valuation, they equate it to like a 99 year bond. They talk about the MIT bond. It’s in their metrics. It’s just such a unique story that until somebody says, “We’re coming after,” again, who’s to fight against them.

David Auerbach: Now let’s flip it. They do their earnings based on earnings per share. Most REITs focus on FFO or AFFO. That’s one caveat to be aware of. Number two, rates traditionally have a very high dividend yield. Right now, I believe you mentioned Nareit before. I highly recommend you go check out That’s the website for Nareit. Right now, the typical REIT dividend yield, I believe is just around 4%. Safehold is well under that. Now the company says as they go out and acquires how they raise their dividend and raise the yield. Again, thinking about the definition of longterm, Safehold is not a day traders type of game. Safehold is not a name that you’re going to want to sit here and just own for a year. If you’re buying Safehold today, it’s what is this going to look like five, 10 years from now as they continue to amass high quality real estate portfolio.

David Auerbach: One other thing, if you’re a sports fan, and I think you are a sports fan, they happen to be locally here in Texas, because I know this. One of their partners is somebody who used to go by the nickname of The Admiral. Do you know who The Admiral was?

Andrew Dick: No.

David Auerbach: David Robinson, who was a famous basketball player, who played for the San Antonio Spurs, won many, many NBA championships and was in the Navy. He was a Naval, I believe he was an, not national, but he was very highly up in the Navy. He was on the Spurs. His company, Admiral Capital, is a partner with Safehold on some of their Texas properties here. There’s a sports tie in there for you.

Andrew Dick: Very interesting. Yeah, I think the company’s interesting as well. We see a lot of ground leases in the healthcare industry, and so I like it. I think it’s very interesting. David, let’s switch gears. We’ve only got a couple minutes left. Mentoring, last time we spoke you, you told me you’ve been spending a fair amount of time mentoring young professionals. You’ve always given back to the REIT community in terms of your time and resources. I know you used to publish a weekly newsletter. You may still do that.

David Auerbach: Still do.

Andrew Dick: Talk about giving back, mentoring, because a number of folks who listen to the podcast, they’re young professionals looking to advance their career.

David Auerbach: It’s a great topic. I really appreciate you bringing this up. I think at some point in our careers, we know that the next generation is coming up in the ranks. After 20 plus years of doing this, we learn a couple of things. If I’m able to pave the path, smooth the path for the next generation by dealing with my experiences, or if I’m able to answer some questions that they’re afraid to ask, then that gives them a little bit more sense of comfort.

David Auerbach: I’m also a big believer of karma and what goes around, comes around that when I used to interview folks, at my own shops. Whenever anyone would come in, usually there’d be interviewing with four or five, six other people. I would always say the person just to try to, first of all, throw them off a little bit, but second, just so they feel a little bit more at ease, I would always say to the person, “My job here as I sit here and interview you is to get you to ask me the hard hitting questions. You are to ask me the questions that you’re afraid to ask, because I don’t want you to come on board here and say, ‘Well, nobody told me about this. I wasn’t expecting this. How come I didn’t know that this?'” I would always say, “There’s no such thing as stupid questions just stupid people.” Have you heard that expression before.

Andrew Dick: I have.

David Auerbach: I love using that expression. I always say, “There’s no such thing as a stupid question. What you may think is stupid may actually be the secret sauce that what you should be asking that you you didn’t realize that you should ask.” It carries through to the mentorship thing that I’m trying to do, because I want people to number one, not be afraid of the interview process. A lot of people now, because they are so tied to their phones, they lose out on the face-to-face interaction. When you’re sitting across the table from somebody, and if you don’t know how to cure yourself in a face-to-face conversation, you have to understand, you may be investing in this company, be a management of this company, you could own this company, which means you’re going to be dealing with the media and all this other stuff. If you don’t know how to interact with people, what kind of message is that going to say to your boss, your partners, your shareholders, whatever.

David Auerbach: I feel like now, especially with the folks that I’m focusing on, it’s the guys that are anywhere from getting out of high school, going into college, dealing with their first intern type interviews, going into grad school, coming out of grad school, going into their next positions, whatever it is, but if my 20 plus years of REITs and ETFs is able to help them understand just a little bit more of what they’re walking into or I had somebody reaching out to me today asking me about Safehold. I got them an interview with the company. He wanted to understand what is the company. I sent him a friend’s video. I’m like, “Watch this. If you watch this, then when you call the guy and have your interview with him today, you’re able to come prepared with a roster of questions, because you said, ‘I watched your interview. You said this. Can you explain this to me? I don’t understand.'” What does that say to the person across the table from you? This guy spent his time doing his homework. He really cares. He’s really interested.

David Auerbach: When somebody calls me and says, “I’ve got the second interview, I got the job, whatever,” that’s about as valuable as a paycheck is in my opinion. More importantly, it could be a year from now, 10 years from now, a hundred years from now, that guy isn’t going to forget. He is going to remember that I helped him get to that point.

Andrew Dick: David, last question. What advice would you give to a young professional who’s looking to get into the real estate business?

David Auerbach: It’s the same, same thing I’ve heard, that I’m sure you’ve heard a million times over and I stand by it. It’s not what you know, it’s who you know. Networking as a full-time, 24 hour a day job. It’s why I lost my first job as a retail broker before I joined Green Street. My boss and I had a disagreement as far as the proper times to be networking. He thought it should be an after the stock market hours type of job. I said to him, “Wait, if a prospect says they want to have lunch with me, I have to tell him no, because my boss said I can only network after hours?” I said, “That’s the craziest thing I’ve ever heard.” They fired me the next day because I said that. As a result, you and I would have not connected if it wasn’t from networking back in the day. I wouldn’t be able to email David Simon and him email me back on a day of earnings without networking. As I say on a mentorship platform, you never know when you’re going to come across your next partner, your next boss, your next client, whoever it is. It’s all because of networking. I would emphasize get out there, meet folks, explore LinkedIn, ask questions, learn, as Red says in Shawshank, “Get busy living or get busy dying.”

Andrew Dick: Good advice. David, where can our audience, how can they reach you?

David Auerbach: I am affiliated with a broker dealer out of Chicago called World Equity Group. My email address there is davidauerbach, D-A-V-I-D A-U-E-R-B-A-C-H. @weg, W-E-G, ( If they want to ask about the daily REIT note that covers the REIT sector, please feel free to reach out to me at that email address or on my consulting address at, I-R-R-E-A-L-I-Z-E-D, and I’d be happy to chat with you more there as well.

Andrew Dick: Great. David, thanks for your time. Thanks to our audience for listening on your Apple or Android device. Please subscribe to the podcast and leave feedback for us. We also publish a newsletter called the Health Care Real Estate Advisor. To be added to that list, email me at 

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