Lazard Portfolio Manager Sees REIT Returns of 10 to 15 Percent in 2015
03/18/2015 | by Allen Kenney

Jay Leupp, managing director and senior portfolio manager at Lazard Asset Management, joined REIT.com for a video interview during NAREIT’s 2015 Washington Leadership Forum.

After a solid performance for REITs in 2014, “we do think there’s still room to run” in 2015, Leupp said.

“We don’t think rates are going to rise as much as most pundits,” he said. “We do still see very strong real estate fundamentals… and we still see rent growth and earnings growth tracking ahead of inflation. In our view, this adds up to a pretty good year for REITs.”

Total REIT returns should be in the 10 to 15 percent range in 2015, he noted.

Turning to overseas markets, Leupp said the ongoing Greek debt crisis is a “potential risk to investing in Europe,” particularly countries with large banking establishments that lend into Greece, such as Germany. Although Leupp expects Greece to ultimately stay within the eurozone, he noted that Lazard is on the lookout for buying opportunities triggered by short-term volatility in European property markets.

Meanwhile, Leupp highlighted intriguing buying opportunities in other international markets, including Hong Kong.

“Hong Kong really is a unique real estate market,” he said. Leupp pointed out that the country features high-quality assets and tenants, “almost permanent” demand and a strong institutional investor base.

“We like valuations in Hong Kong,” said Leupp, noting that Hong Kong properties have sold off in line with broader Chinese property and equity markets.

Other geographic areas of interest for Leupp include the Philippines, Thailand, Indonesia and Malaysia. “In particular, we like the dynamic we see in the Philippines and democracies that are continuing to grow that aren’t really subject to broader Chinese influence,” Leupp said.

Leupp also noted that he believes some bargains exist in Scandinavia, particularly due to the fall in oil prices. Parts of London also look attractive, Leupp added.

Elsewhere, Mexico is showing steady economic growth, renewed investor interest and political stabilization, Leupp said. “We think over the longer term it’s going to be very exciting,” he said.