REAL-ESTATE INVESTMENTS: WHICH TO CHOOSE
As I’ve already mentioned in the previous posts investing in real-estate is rather risky and requires special knowledge, skills and good agility. This concerns especially real-estate-related shares. One can’t manage here without assistance of a specialist.
I think it would be advisable to consider the opinion of Kenneth Heebner, who since 1994 has managed the $1.2 billion CGM Realty Fund. This fund is characterized with the best 10-year record of all real-estate-focused mutual funds. CGM Realty Fund had an average of nearly 22% annual rise during the past decade.
CGM Realty Fund has approximately 25% of the stocks in mining stocks. Mr. Heebner regards mining companies’ stocks as attractive because of the land they use. He also sees significant opportunity in real-estate investment trusts, which account 69% of the Fund. And 6% the Fund has in commercial real-estate brokers.
According to Mr.Heebner today it is advisable to invest in office and apartment REITs (like Archstone-Smith Trust, Essex Property Trust Inc., SL Green Realty Corp. and AvalonBay Communities Inc). The Fund’s apartment REITs are focused basically in parts of the Northeast and California.
Due to the rising interest rates homes became less affordable for many consumers, which results in the increasing of apartments rents. Thus building companies should increase construction of rental apartments in areas where demand didn’t fall, but gradually goes up. This is featured mainly to the areas like Texas and some others.
Among the office sector Mr. Heebner marked out Vornado Realty Trust as well as SL Green.
As regards investing into home-builder stocks, I think that is hardly can be considered as expedient due to the difficult conditions in which home builders are turned out. I suppose that many economists, including Mr. Heebner, will support my opinion. Thus, according to Mr. Heebner, CGM Realty Fund bought home builders at the end of 2001 since these stocks were trading at six times earnings. But when the leaders of the fund understood that the growing demand for homes was caused mainly by people who maid purchases for investment purposes using borrowed money, they began to worry and started cutting back on home-builder shares at the end of the fourth quarter of 2004 and eliminated them during the first six months of 2005
Being guided by the strengthening of the global economy and strong growing demand for leisure travel I regard investing into hotel REITs as rather advisable. The weakening of the dollar will increase tourism. Rising supply of hotels during the next several years will make for a healthy environment for the REITs.
The governing body of the CGM Realty Fund gives its preferences to Host Hotels & Resorts, LaSalle Hotel Properties and FelCor Lodging Trust.
And in conclusion I’d like to repeat once more time that investing into real-estate, and especially into real-estate-connected stocks, requires special grounding and that is why inexperienced person should take advise from a good economist or real-estate agent. Meanwhile, as follows from this article the most attractive spheres for investment today are apartment REITs, office sector and hotel REITs, and one should not invest into home-builder shares.