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TWST: Andrew, are there any apartment REITs that you own currently?

Mr. Davis: A couple. First, I’m going to mention an apartment company that is definitely off the radar, a company that I actually just got back from visiting yesterday. It is not a REIT and it is traded in Toronto, not the US. It’s a Canadian company called Boardwalk Equities (Toronto:BEI.TO). Boardwalk Equities is the largest apartment owner in Canada, by far. I would guess they are probably bigger than the next 10 competitors combined; they’re the dominant player. What’s exciting about Boardwalk is that many of the in-place rents at their properties are well below market. That goes for apartment units in all of their markets. This is good news on two fronts. First, Boardwalk can realize substantial internal growth by rolling its portfolio to market. Since apartment leases tend to be for only one year, the potential for growth is realized more quickly than for other sectors. Second, not a lot of new supply is coming onstream. Less new supply is always a good thing for real estate investors. Management owns about 35% of the business which we like quite a bit. Lastly, the company leads the pack, in both Canada and the US, in terms of technological sophistication. They currently are trying to develop a way of licensing this process to other real estate companies which, if adopted, could cut more than 10% from the lessee’s overall expenses. This is a huge carrot for any real estate company and we will be monitoring Boardwalk’s progress on this item closely. They also plan to deliver a wireless device to every apartment unit they own or manage that will provide their tenants a menu of services including video-on-demand, high-speed Internet access, cable TV and telephone service. Delivery of this product will be very profitable and they are making great progress but are not there yet. Again, we are monitoring this closely because, if it works, Boardwalk will be the only company in North America with it. Tenants will notice. So for all of these reasons, it’s a stock that in my book is cheap at 13.5 Canadian. I think that this stock is worth a look.

TWST: Do you invest in any real estate companies outside North America?

Mr. Davis: At this moment, no. That is not something I would rule out but we still believe that US real estate stocks are very undervalued. I’ve been to Hong Kong and Europe and spent time in a variety of other countries understanding what the opportunities are, but we have not found anything as compelling as what we see in the US market today.

TWST: What have you been buying recently?

Mr. Davis: Recently, over the last couple of weeks, we’ve been buying nothing. That’s because we’re already fully invested in the names I just discussed. We are constantly reviewing our holdings. It’s definitely pared and specialized. As a portfolio manager, there is nothing that is more disciplining than having to sell something to buy something.