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Commercial Real Estate Rebound Is Beginning: Portfolio Managers

U.S. mortgage applications inched higher this month, the Dow Jones real estate index rose 114 percent since the 2009 March lows and foreclosure filings rose 6 percent in February from a year ago, the smallest increase in four years. Is the real estate sector the place to invest again? Jay Leupp, senior portfolio manager at Grubb & Ellis, and Paul Curbo, portfolio manager at Invesco AIM, discussed their sector insights. (See their stock picks, below.)

“We’re in the early stages of a 3 to 5 year recovery in commercial real estate and in general…things aren’t quite as bad in commercial real estate as a lot of the press has put out over the period of time,” Leupp told CNBC.

“The fact that stocks have rallied 100 percent from their bottoms, they’re still at their March highs—we’re seeing a lot of good income opportunities in the space right now,” he continued.

Leupp is “overweight” lodging, retail and specialty—specifically, self-storage. On the other hand, he is “underweight” office, health care and apartments.

In the meantime, Curbo said the capital markets part of real estate has been quite strong.

“The REITs have rallied 100 percent,” he noted. “The supply outlook is very positive and the demand outlook is going to follow the overall economy."

But, he cautioned, "We need job growth in order to have the demand come back into the market.”

Curbo favors sectors that can generate earnings growth and likes the health care and tech-focusedreal estate sectors. He added that as the economy improves, the apartment sector also looks favorable.

Recommendations:

Leupp’s Picks:

Ashford Hospitality Trust

Glimcher Realty Trust

Associated Estates Realty

U-Store-It

Entertainment Properties Trust

Sun Communities

Curbo’s Picks:

Digital Realty Trust

Ventas

Mid America Apt. Communities

Vornado

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Disclosures:

No immediate information was available for Curbo or Leupp.

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Disclaimer

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