In the Market? Buy in Asia
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Where in the world are Sherlock Holmes, Charlie Chan, and Lieutenant Columbo when you really need them?
I figure these supersleuths could clear the air and give us all some much needed clarity and a sensible handle on how to address real estate investments, given the many conflicting Wall Street views on this sector. For example, consider these widely held, miles-apart beliefs, both prevalent and both enough to drive anyone up the wall:
• Housing is in the process of stabilizing after its recent slump; it should soon be percolating again, and it’s time to latch on to some of those beaten-up housing stocks.
• Watch out, the worst of the housing slowdown is yet to come. It will surely slam the economy, and those housing-related stocks are in for a stiff dose of renewed selling pressure.
So, the pivotal question: Can you still make a buck in real estate shares? Two pros emphatically say yes, but both cast their ballot for Asia, not America.
One is money manager Selwyn Ortz of Hong Kong-based HK Investments Ltd., who personally owns nearly $56 million worth of foreign real estate, predominantly in Asia. Despite all the bad press for real estate, he believes it remains a viable, moneymaking investment vehicle, provided you pick the right locale. At this juncture, he says: “The best way to play real estate is to invest in Asia, rather than America. It’s the no. 1 place to be. It’s like buying real estate in America in 2000.”
He’s so cocksure, he tells me, that he bought some Asian real estate securities for his mother and 2-year-old daughter. He declined, though, to talk about specific investments.
A similarly sunny view of the Asian market — plus some specific ways to capitalize on it — is offered by Gregory Dorsey, an editor of Emerging Investments, a relatively new Big Apple monthly newsletter.
Although some overseas market trackers argue that Asia, especially China, is overheated, Mr. Dorsey thinks otherwise when it comes to specific real estate investments in the Asia Pacific region, which is his favorite real estate market.
Citing what he calls the “real real estate bargains” there — which are viewed as good ways to play the global boom — he says there are myriad bullish aspects to Asia’s booming real estate markets. Across the region, he points out, property values are on the rise, as are rental rates for all property types, including offices, retail, residential, and industrial properties. In Hong Kong, for example, government building restrictions, coupled with a thriving economy, have sparked a boom both in residential and commercial properties, he notes.
One reason Mr. Dorsey is so gungho is the region’s economic growth, which is pegged to come in this year at 4.6%, led by China’s 9% expansion. (In comparison, American GDP growth this year is largely projected in the 2.5% to 3% range.)
Yet other pluses for the Asian real estate market are said to be attractive valuations, rising dividend incomes, and average 15% to 20% discounts to net asset values, compared with American real estate investment trusts, which are trading at a slight premium to their NAVs.
Martin Cohen and Robert Steers of Cohen & Steers Capital Management are viewed as the deans of investing in publicly traded real estate, having founded 16 mutual funds devoted to this area. One of their most recent offerings is the Cohen & Steers Asia Pacific Realty Shares ($14.24), one of the two funds Emerging Investments is pushing in this sector.
The bulk of this fund’s assets are deployed in Hong Kong (33%), Japan (32%), Australia (27%), and Singapore (7%). Within these countries, the focal points are office properties (38% of assets), shopping centers (26%), residential (13%), and industrial properties (6%). Particular emphasis is placed on securities priced at a discount to their net asset values.
The newsletter’s other pick is an exchange-traded fund, the Street-Tracks Dow Jones Wilshire International Real Estate Fund ($66.42). The ETF, which invests in more than 140 real estate stocks in 24 emerging and developed countries, seeks to closely match the returns and characteristics of the total return performance of the Dow Jones Wilshire Real Estate Securities Index. While the fund is new, its underlying index boasts an outstanding long-term record, posting average annualized gains in excess of 29%.
The bottom line from our two Asian real estate bulls: Don’t let all the talk of a coming housing bust scare you. There are still sizable bucks to be made in real estate, but to really do it, think Asia.
