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March 14, 2007
Buying REITs for the Long Term
Barron's Online, via Yahoo Finance
WHILE MANY INVESTORS focus on the net asset value of real-estate investment trusts, portfolio co-managers Andrew Davis and Chandler Spears of the Davis Real Estate Fund prefer to focus on revenue growth potential over the long term -- the very long term.
Which means that they (HEART) Forest City! [Snarky commentary interspersed.]
Q: What do you like about your top holding, Forest City Enterprises (ticker: FCEA) in particular?
Spears: Much of the value proposition in real estate is doing things that a lot of other people can't do. And it just so happens that actually finding land, getting land entitled for a specific use and then bringing together all the various components that are necessary to go vertical on construction is a very difficult proposition.
[Cough, cough! All of this is much easier when Forest City has a proven track record in making backroom deals to use eminent domain and doesn't have to bid on the land.]
[Forest City's Brooklyn-based] Atlantic Yards, for example, is going to be a massive project and that is just one of many that Forest City is working on. Atlantic Yards is going to have residential units, it is going to have retail space, and it is going to have a new arena. They've done just tremendous things all over the country doing these types of massive projects and not everybody can do that. Forest City can actually drive preferential pricing. It has not always been the low bidder for a lot of the projects that they have won. [Sometimes they're, like, the no-bidder!] They've actually offered to do it for a higher price [than competing bidders]. But because they have a franchise value and a history of being able to complete these projects, they end up winning.
Posted by lumi at March 14, 2007 7:51 AM