What do the top hedge fund and mutual fund gurus like in the real estate industry? This article, the thirty-second in a series, identifies through a research of the latest available institutional 13-F filings the gurus that are most invested in the real estate industry, and the specific stocks within that industry that they prefer to hold in their portfolios. Please note that this group includes Real Estate Investment Trusts or REITs, Property Management, Real Estate Development and Real Estate services companies. REITs are a special form of corporation that by law have to deploy at least 75% of their total investment assets in real estate, and in return do not have to pay any U.S. federal income tax as long as they pay out at least 90% of their net income, which may be taxable, in the form of dividends to their shareholders. As such, publicly listed REITs may be of interest to some shareholders.
Also, please note that this article will be among the last in this series, as the latest March 2011 quarter 13-F Institutional filings are now beginning to come out. About 40% were out as of this weekend, and most should be filed by the end of this week. As such, once 13-F filings are complete for all guru funds, in the next series starting the end of this week to the beginning of next week, I will bring to you the top new and added picks of guru funds by industry/sector detailing this time not the top holdings, but more importantly what new positions they took and what existing positions they added to in the latest March 2011 quarter. Please check my article page for previous articles in this series, as well as for definitions of "guru" and other jargon.
The table lists the top six investment gurus whose funds have invested at least thrice that average or 9.9% in the real estate group (as defined before). The following is a list of the top real estate group company picks of guru funds over-concentrated in that group:
- Real estate property management companies CB Richard Ellis Group (CBG), a provider of property investment management, loan servicing and origination, and leasing advice with 300 offices worldwide; Jones Lang LaSalle Inc. (JLL), a provider of real estate and money management services in more than 750 locations in 60 countries.
- Mortgage REIT Capitalsource Inc. (CSE), a REIT that provides senior and subordinate commercial loans in 43 states, D.C., Puerto Rico, Canada and Europe.
- Diversified REITs include General Growth Properties (GGP), a REIT that owns, develops and leases retail centers and office, industrial and mixed-use properties in 43 states; and Winthrop Realty Trust (FUR), a REIT that owns and manages retail, office, and mixed-use properties in the U.S.
- Lodging REITs Host Hotels & Resorts, Inc. (HST), a REIT that owns 110 full-service upper-upscale and luxury hotels across 26 states, D.C., Canada, Mexico and Chile; Diamondrock Hospitality (DRH), a REIT that owns, acquires and invests in premium full-service hotels and premium urban limited-service hotels in the U.S.; Sunstone Hotel Investors (SHO), a REIT that buys, owns and renovates primarily upper upscale and upscale full-service hotels in 13 states.
- Industrial REIT AMB Property Corp. (AMB), a REIT that acquires, develops, and operates industrial properties in the Americas, Europe and Asia.
- Office REIT SL Green Realty Corp. (SLG), a REIT that owns, manages, leases, acquires and develops Class A/B office properties in the New York Metro area.
- Retail REITs Simon Property Group Inc. (SPG), a REIT that owns, operates and develops regional malls, outlets and shopping centers in 41 states and Puerto Rico; Tanger Factory Outlet (SKT), a REIT focused on developing, acquiring, operating and managing factory outlet shopping centers across 21 states; Taubman Centers Inc. (TCO), a REIT that owns, develops and acquires regional shopping centers in major metropolitan areas in 10 states.
- Residential REITs such as Equity Residential (EQR), a REIT engaged in acquiring, developing, owning and managing multi-family properties located in the U.S.; and Home Properties Inc. (HME), a REIT that acquires, develops, and operates 107 apartment communities with over 36,000 units in 9 states; Avalonbay Communities (AVB), a REIT that develops, acquires and operates 164 apartment communities containing 47,631 apartment homes in 10 states; Essex Property Trust (ESS), a REIT that owns, acquires, develops and manages primarily apartment communities in CA, WA and TX.
- Diversified Infrastructure Property Management Companies Brookfield Infrastructure Partners (BIP), with a wide array of global assets including Port facilities in Australia and the U.K., electricity transmission lines in Chile and Canada, electricity and gas distribution lines in New Zealand, natural gas pipelines in the U.S., rail infrastructure in Australia, timberlands in U.S. and Canada, and hospital facilities in the U.K.; and Macquarie Infrastructure Co LLC (MIC) invests, owns, and operates in a diversified group of infrastructure businesses in the U.S., including an airport services business, a district energy business, a gas production and distribution business, and a 50% interest in a bulk liquid storage terminal business.
Fund and Guru
Type of Fund
Assets Under Management
Percent Equity Portfolio invested in Real Estate Companies
Major Real Estate company positions in Portfolio
Blum Capital Partners (Richard Blum)
Hedge Fund - Deep Value
$ 1.7 billion
Pershing Square Capital Management, L.P. (Bill Ackman)
Hedge Fund - Deep Value and Shareholder Activist
$ 5.8 billion
Capital Growth Management LP (Ken Heebner)
Mutual Fund Manager
$ 6.8 billion
HST, SPG, CBG, SLG, DRH, EQR, GGP, HME, AMB, JLL, AVB, SKT, ESS, TCO
Pabrai Investment Funds (Pabrai Mohnish)
Hedge Fund - Value-driven
$ 340 million
Fairholme Capital Management LLC (Bruce Berkowitz)
Hedge Fund - Deep Value
$ 15.8 billion
MSD Capital (Michael Dell)
$ 900 million
New York-based Pershing Square, founded by Bill Ackman in 2003, is a $5.8 billion hedge fund. He has a deep value orientation and is a shareholder activist, meaning that the fund can take large stakes in target investments and then can use its influence resulting from the ownership to effect change at these companies, with the objective of eventually selling them for a tidy profit. He currently holds a concentrated portfolio of 12 positions.
Ken Heebner, co-founder of Capital Growth Management, manages the CGM family of mutual funds. He has a reputation of making bold sector bets, was on the cover of the June 9, 2008 issue of Fortune magazine, and was called as America's hottest investor.
Pabrai runs a $340 million hedge fund. He is a value investor, investing primarily in out-of-favor smaller companies, with a market capitalization of less than half a billion dollars. His portfolio is generally concentrated with less than 10-20 companies (for more detail of Pabrai's fund and his holdings and new picks, please see my previous article on May 5).
Miami-based hedge fund and mutual fund manager Fairholme Capital Management LLC is a deep value investment manager, founded by chief investment officer and managing member Bruce Berkowitz in 1997. Fairholme Capital seeks long-term growth by investing in concentrated portfolio of equities. Fairholme's preferred investment strategy is to silently partner with exceptional owner-managers who have demonstrated success, honesty, and integrity. The firm buys when it finds such companies generating or holding significant cash when compared to market values. Purchases are made without regard to categorization. The firm also invests in special situations, including, but not limited to, Chapter 11 reorganizations.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix by Edgar Online, Zacks Investment Research, DailyGraphs, Thomson Reuters and Briefing.com. Fund data including assets under management and firm profiles are sourced mostly from Hedgetracker.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.