An upturn is coming in the publicly traded real estate space, and investors need to be nimble to take advantage, according to Ritson Ferguson, manager of the $1.9 billion ING Global Real Estate Fund (IGLAX).
“The market is still soft, but right now, REITs are still a good value,” he said. “The fundamentals are beginning to stabilize.”
Mr. Ferguson has been a part of the fund's management team at ING Clarion Real Estate Securities since the fund was launched in 2001.
He believes that a lot of the negative reports about the state of real estate are more indicative of the plight of private-investment funds that are holding overleveraged and underoccupied properties.
“I live in the world of public markets, which is a little different than
private equity,” he said. “The private market is looking in the rearview mirror, and everything is based on appraisals and sales.”
From Mr. Ferguson's perspective, which concentrates on publicly traded REITs and real-estate-related companies, the “forward-looking listed markets” are rich with opportunities.
“The listed market doesn't always get it right, and it tends to overdo it in both directions,” he said. “But the listed market anticipates trends, and the private market tends to follow by about 12 to 24 months.”
Mr. Ferguson's fund has a 43% weighting in the Asia-Pacific region, followed by a 37% weighting in the Americas and a 20% weighting in Europe.
The United States represents the largest single country, weighing at 34%.
“The real estate recovery and upswing has already begun in places like China, Hong Kong and Australia, and the upswing will be later for the U.S. and parts of Europe,” he said. “I think things are still tough out there, but getting better, and the time to get involved is when the tide and perception is turning.”
A few of the real estate investment trusts he likes right now are mall owner Simon Property Group Inc. (SPG) and Vornado Realty Trust (VNO), an office and retail-space owner.
The fund, which averages about 90 positions, has seen some wild swings through the recent market turmoil.
Last year, it gained 38%, while the S&P 500 was up 25%.
In 2008, the fund declined by 45%, which compares with a 38% drop by the S&P 500.
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