Portfolio Manager Perspectives

Jeff Benjamin

Real estate momentum building, analyst says

Yablon sees fundamental recovery in property markets around the world

Mar 3, 2011 @ 4:53 pm

By Jeff Benjamin

If you look beyond the housing market, there are reasons to believe the global commercial real estate market is poised to continue a strong rally, according to Jason Yablon, a real estate securities analyst at Cohen & Steers Inc., which manages $25 billion in real estate assets.

“Right now is a pretty good time to invest because we're still at the beginning of the next stage of global real estate growth,” he said. “Valuations of global real estate are pretty good today, and we're seeing a fundamental recovery around the world.”

Mr. Yablon helps to tap into that global real estate market as a member of the investment committee for the Cohen & Steers Global Realty Majors ETF Ticker:(GRI).

The ETF, which is designed to provide exposure to the world's 75 largest real estate companies, gained 23% last year and 34% in 2009.

While it is technically an index fund, the portfolio is constructed with a blend of quantitative and qualitative methods, which includes requiring a minimum market capitalization of $750 million.

“We visit all the properties because we're looking for good corporate structures, experienced management teams, good balance sheets and a long-term growth strategy,” Mr. Yablon said.

The portfolio, which includes companies from 13 different countries, has limited exposure to emerging markets, and all positions are reviewed quarterly.

Unlike some indexed strategies, positions are not held strictly based on valuation metrics, which helps explain the recent addition of General Growth Properties Inc. Ticker:(GGP).

The Chicago-based real estate investment trust, which recently emerged from bankruptcy, was described by Mr. Yablon as having a “high-quality portfolio.”

“Valuation is not a strict parameter, and current valuation is not always a consideration,” he added. “Our evaluation is based on overall quality.”

Mr. Yablon said institutional investors already have started increasing their real estate exposure but that retail-class investors still are distrustful about the recovery.

“There is very little supply now because there has been no new construction, and this allows the better-quality assets to continue to improve faster than the lower-quality assets,” he said. “We're trying to reflect that in this index by owning the better-quality assets.”

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.


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