Third Avenue's Jason Wolf Talks Hong Kong Real Estate
In Third Avenue's eyes, these real estate stocks are among the most attractive in the world.
Third Avenue Value (TAVFX) and Third Avenue Real Estate Value (TAREX) both maintain large commitments to a handful of Hong Kong real estate companies. The management teams on both funds discuss them regularly in their quarterly shareholder letters, including their most recent submissions, but with exposures of more than 40% of assets and about 20% of assets, respectively, questions about them abound. At the recent 2011 Morningstar Investment Conference in Chicago, I caught up with Jason Wolf, who comanages the real estate fund and is also the firm's resident expert on Hong Kong real estate companies.
Q. When it comes to investing, Third Avenue's mantra is "safe and cheap." What makes its Hong Kong real estate investments safe?
A. Certainly, these companies have all exhibited financial strength through our investment horizon. The second element of safety is a strong and experienced management team that is incentivized through either stock ownership or stock options, and one that has historically been a quality steward of capital for shareholders. When you look at the aspects of Cheung Kong, Henderson Land, Wheelock, Hang Lung--they're all led essentially by rags-to-riches-type guys that have built these businesses over a period of going on 40 years. We get comfortable because so much of their financial net worth is tied up into these businesses and they have grown them for such a long period of time that they offer fantastic financial disclosures, which is the third element of "safe" in being able to analyze a company through the public filings that a company provides.
Bridget B. Hughes does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.