REITs a Play on Good AND Bad News
Steve Brown thinks the good news makes it a good time to invest in real estate investment trusts (REITs). So does the bad news.
Brown's Neuberger Berman Real Estate Fund is up an average of 18.96 percent per year over the last five years. He offered CNBC his investment insights.
First, the bad news:
"We're down 40 percent from the peak, 20 months ago," Brown told CNBC. "Most REITs are trading at 20 to 30 percent discounts to their net asset values, so that's historically a very attractive entry point."
- Video: Watch the entire interview (3 mins, 28 secs)
Now, the good news:
"We're looking at the federal government taking aggressive actions to support the economy," he said. "We believe that over the next couple of months, we could see a Fed funds rate of 2 percent, and that environment, with REITs yielding 5, 6 percent, we think that would be a positive investment environment for REITs."
Specifically, Brown recommends Toronto-based Brookfield Asset Management.
"It's a global real estate fund manager," he explained. "What they're benefiting from is the trend towards money flows going to alternative asset managers...so their access to capital is great."
Also on his list is Equity Residential.
"Transactions will be down dramatically this year, say 50 percent, in terms of property sales and commercial mortgage financings," he said. "However, the bulk of the REITs' earnings is driven by owning existing properties through rents and changes in occupancies."