Evercore Independent Thinking | April 24, 2017
Ryan Dobratz, co-lead manager of the Third Avenue Real Estate Value Fund, talks to Evercore Wealth Management Spring 2017 issue of Independent Thinking about Third Avenue’s approach to Real Estate investing, global opportunities, and our bias for Real Estate Operating Companies (REOCs) over REITs:
“As a real estate strategy that seeks to maximize total returns while emphasizing capital appreciation, the fund has always been biased to investing more capital in REOCs than REITs for two primary reasons. One, unlike a REIT that is required to distribute 90% of its net income as dividends each year, a REOC is free to retain the cash flow generated in the business and reinvest in developments, redevelopments or opportunistic acquisitions. This approach tends to result in more attractive rates of growth over time and more tax-efficient capital appreciation. Two, having the ability to self-finance this expansion is a much more reliable business model in our view, as REITs are more dependent upon the somewhat fickle capital markets to finance their expansionary efforts.”
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The content in the above publication should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or investment products or to adopt any investment strategy. The market opinions and analysis presented may not reflect those of Third Avenue Funds as a whole and different views may be expressed based on different investment styles, objectives, views or philosophies of the participants.
Factors that could affect the value of the Real Estate Value Fund’s holdings include the following: overbuilding and increased competition, increases in property taxes and operating expenses, declines in the value of real estate, lack of availability of equity and debt financing to refinance maturing debt, vacancies due to economic conditions and tenant bankruptcies, losses due to costs resulting from environmental contamination and its related clean-up, changes in interest rates, changes in zoning laws, casualty or condemnation losses, variations in rental income, changes in neighborhood values, and functional obsolescence and appeal of properties to tenants.
Third Avenue Funds are offered by prospectus only. The prospectus contains important information, including investment objectives, risks, advisory fees and expenses. Please read the prospectus carefully before investing in the Funds. Investment return and principal value fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. For updated information or a copy of our prospectus, please call 1-800-443-1021 or go to our website at www.thirdave.com. Distributor of Third Avenue Funds: Foreside Fund Services, LLC.
About two-thirds of the Fund’s capital is now in REOCs and real estate-related businesses, including some of the top holdings like Cheung Kong Property in Hong Kong and Lennar Corp in the United States.