For Subscribers

Get the complete article now!

TWST: Sam, how does it look from the buyside of the Street?

Mr. Lieber: This has been adequately covered here, but I would like to amplify a couple of points. I wouldn’t necessarily call this a rally, I’d call it an adjustment to an oversold situation. It’s important to note that the broad NASDAQ index peaked on March 10, and the more focused NASDAQ 100 Index actually had a penultimate top around the 12th. REITs started outperforming on the 14th of March, and from my perspective REITs moved with old economy stocks in general. So it was not unique to REITs per se, but old economy stocks all of a sudden were the flavor of the day. To amplify some things Chris said, the pricing of a number of the stocks is not really surprising. In fact, they seem to be more or less in line. The good stocks have outperformed, the larger cap stocks generally have done better. The companies with exposure to the stronger markets have performed better, and some of the really smaller, dicier companies, or poorly run companies, have faltered.

TWST: Sam, isn’t an international strategy something that could be applauded by investors if done properly? Or should it be approached only with the utmost caution?

Mr. Lieber: Your caveats are good ones, if done properly. A lot of companies did look abroad a few years ago when their stocks were riding high. Chelsea GCA (NYSE:CCG) has a couple of properties in Japan. We’ll see how significant that becomes. They are doing it with local partners, and they’re providing the expertise. Certainly, I am a proponent of investing internationally, as Alpine’s International Real Estate Fund has been for a dozen years. The real issue though is — should US companies with only local expertise be involved abroad? One need look no further than Sam Zell, who decided that he did not want to have Equity Office Properties (NYSE:EOP) and Equity Residential Properties Trust (NYSE:EQR) investing abroad and created a separate venture, Equity International, which he structured very differently, utilizing partners abroad. The weakness of Trizec’s (NYSE:TZH) price is due to a number of reasons, but the main concern is that they may be going in a more international direction. The market is uncertain about this because it’s not familiar with international investing in real estate and is appropriately cautious. The history is that foreign companies that have come to the US or vice versa have retrenched with their tails between their legs, and whatever else they could bring back with them, because it has been very difficult to make money abroad if you are not a local; however, it can be done with partners.