Geoffrey P. Dybas, Executive Managing Director, heads the Duff & Phelps’ Global Real Estate Securities team, and is the Portfolio Manager of the Nordea 1 – Global Real Estate Fund. He is Senior Portfolio Manager and co-founder of all dedicated REIT strategies managed by Duff & Phelps, including the Virtus Duff & Phelps Real Estate Securities Fund; the Virtus Duff & Phelps International Real Estate Securities Fund; the Virtus Duff & Phelps Global Real Estate Securities Fund; the Virtus Duff & Phelps Real Estate Securities Series, a series of the Virtus Variable Insurance Trust; the REIT portfolio within the DNP Select Income Fund Inc., a closed-end fund; and separate institutional accounts. He joined Duff & Phelps in 1995. Mr. Dybas was a corporate banker for Bank One and began his investment career in 1989. He holds a BS degree, cum laude, from Marquette University and an MBA from the Kellogg School of Management at Northwestern University.
What made you want to work in the financial sector? Was becoming a fund manager always your goal?
A deep passion for dynamic, global financial markets and what they have to offer drove my vocational interest in the financial sector. Becoming a fund manager was always my goal prior to attending university, in undergraduate studies, during post undergraduate work when I earned the CFA within three years of graduation, and even on the application I submitted to graduate school.
How is a normal day in the life of Geoffrey P. Dybas?
Our relentless focus on our clients’ needs and delivering superior results on the capital they entrust to us to manage drives each day at the firm. Collaborating with talented colleagues, whether on the Global Real Estate Securities Team I lead or throughout Duff & Phelps Investment Management Co., defines every day for me personally. On the team, we are constantly engaging with the companies in our investment universe in pursuit of opportunities and preparing proprietary research as part of our robust fundamentally driven investment process. An active dialogue with our traders around current and prospective activity from before the AsiaPac markets open each week through Friday’s close in the Americas is another key element of each day for me.
What key principles drive your investment processes and why?
Our investment process is governed by a five-step approach that builds a diversified portfolio comprised of our best ideas in listed real estate. We believe each step in the investment process serves to reduce portfolio risks.
Step 1: Market and Sector Opportunities Inform Our Views
The first step is the foundation to the rest of the investment process, helping drive our preferences for real estate assets by key variables (e.g., property sector, geographic location, and lease duration). The aim of the first step is researching the interaction between the three dimensions of the real estate market—the macro environment, the real estate rental market, and the real estate investment market. Collectively, they help us develop specific geographic and property sector views.
Step 2: Identify the Best Businesses within a Broad Universe
Our second step filters and screens the universe based on our philosophy of managing investments and years of experience identifying effective proprietary factors that drive real estate security performance.
Step 3: Determine Intrinsic Value and Analyst Recommendations
Field research and company modeling are hallmarks of our research process. Our research combines financial statement analytics and field visits. We reach proprietary conclusions by following a time tested and team-oriented investment style which integrates our proprietary ESG work into our formal investment recommendations. We thoroughly analyze the companies that rank well through our filtering process across five key areas: 1) Management, 2) Investment Property/Analysis, 3) Cash Flow Analysis, 4) Forecast Future Growth Prospects, and 5) Duff’s Multi-Valuation Process (MVP), a proprietary approach utilizing four different valuation methodologies to determine a company’s intrinsic value.
Step 4: Portfolio Construction
We build a portfolio around the highest conviction ideas, through a robust vetting process on our investment team, utilizing our risk analytics, and factoring in risk management and client-specific guidelines.
Step 5: Sell Discipline
We trim or sell securities when a price target is reached, the investment thesis changes, we find a more attractive relative opportunity, or a security or property sector allocation approaches our investment guidelines or target weights.
Do you have any red lines when selecting a specific asset for your portfolio? and what do you look at when selecting assets for your portfolio?
We do not invest in companies with deficient ESG ratings that are unlikely to improve, and specifically are allegedly involved in breaches of international law and norms on environmental protection, human rights, labor standards, and anti-corruption practices.
We focus our investment efforts on high quality owner-operators of enduring commercial real estate with strong management and solid balance sheets. As described above, our robust fundamentally driven investment process guides our selection, and portfolio construction, security by security.
It looks like working from home or at least flexible working is here to stay – what are the effects in the real estate industry?
The real estate industry offers active managers a plethora of investment opportunities, many of which have seen increased demand as flexible work has grown.
Property sectors that have seen accelerating demand include self-storage, which thrives on life change. Flexible work has driven a need for more working space at home, benefiting self storage even more. This in turn is increasing residential demand and benefiting single-family home rentals, apartments, and manufactured home communities. Logistics is another property sector benefiting from increased residential time as more consumer goods are shipped to homes, an extension of the on-going tailwind for e-commerce. Naturally, the flexible work environment shifts the pendulum toward these property sectors and away from office overall, where more markets and submarkets are becoming commodity-like. Companies are giving back some of their leased space and looking to give back more, even while reconfiguring their retained space to stimulate innovation, collaboration, and culture in dedicated gathering spots.
I have recently read in the financial media about the growing Real Estate business being created in the Metaverse – Do you have any thoughts on that? And Do you think Metaverse Real Estate would become a part of your portfolio at some point in the future?
Data centers and cell towers are two property sectors that play critical supportive roles to the Metaverse. These property sectors are excellent examples of how listed real estate choices have evolved from the original core property sectors. For active investors, it is important to determine when the market is appropriately estimating the growth and value they have to offer, both of which can impact the relative attractiveness of listed real estate in property sectors at any point in time.
How things continue to evolve virtually will be key, as will how the Metaverse is powered, which we hope is renewably. Since our focus is on investing in high quality owner-operators of enduring commercial real estate with strong management and solid balance sheets, we should note that listed real estate companies are not pursuing the speculative Metaverse “land” purchases others are. Historically, the listed real estate market has not rewarded companies for excessive land bank positions, but instead prefers to see strong cash flows from leases of high quality real estate.
Which asset classes or sectors do you think are particularly interesting right now? And what asset classes do you think would be interesting in the near future?
We recognize that attributes can vary greatly across geographic markets within different countries, among management teams and property portfolios, and in how balance sheets are structured. That said, the property sectors we find particularly interesting right now are those benefiting from increased demand following the pandemic and those with further opportunities for recovery. Ultimately, these are company-specific selections inclusive of our proprietary ESG work, which helps drive our property sector allocations.
What is the most exciting thing you have seen in the markets since you started working in the financial sector?
It is a challenge to stop at just one! I would note three things: one, the integration of numerous principles into a shared common language and focus on ESG; two, the advancements in technology that make us more productive, more connected, and more aware of big data opportunities (such as GHG measurements in pursuit of carbon neutrality); and three, global markets becoming so deeply connected over time.
I can think back to an IPO roadshow in 1996 where two executives unknown to the public markets were founding an office REIT. They hired an experienced female CFO with a strong rapport in the investment community to round out their executive team. However, I noticed she was not scheduled to receive founders’ equity in filings prior to the IPO. I inquired about the CFO and asked why she was not scheduled to receive founders’ equity given the value she was bringing to the company. Today, that would be an example of engaging with management on an ESG theme. In addition, it could also be noted as a focus on D, E & I (Diversity, Equity and Inclusion).
Do you have any advice for anyone wanting to pursue a career in the asset management industry?
Opportunities now abound in the asset management industry for talented individuals with a passion to learn every day and work collaboratively in meeting clients’ needs. Skills developed in languages, cultural experiences, interpersonal communication, media, writing, graphics, big data, fundamental analyses (including fixed income, currencies, equities, and real estate), and ESG are more valuable than ever. How we engage with clients, markets, and the companies we invest in has never been more exciting. For those candidates seeking a role on an investment team, I would highly recommend pursuing the CFA charter.