Third Avenue Management, an investment management firm, published its “Real Estate Value Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Through the first nine months of the calendar year, the Fund generated a return of +17.02% (after fees) versus +15.26% (before fees) for the Fund’s most relevant benchmark, the FTSE EPRA NAREIT Developed Index. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Third Avenue Management, in its Q3 2021 investor letter, mentioned Preferred Apartment Communities, Inc. (NYSE: APTS) and discussed its stance on the firm. Preferred Apartment Communities, Inc. is an Atlanta, Georgia-based real estate investment trust company with a $689.2 million market capitalization. APTS delivered a 77.70% return since the beginning of the year, while its 12-month returns are down by 120.27%. The stock closed at $13.15 per share on November 5, 2021.
Here is what Third Avenue Management has to say about Preferred Apartment Communities, Inc. in its Q3 2021 investor letter:
“In Fund Management’s view, these trends are unlikely to abate in the near-term and serve to form a constructive backdrop for existing owners of class-A multi-family product in the major Sun Belt markets—including the Fund’s most recent addition: Preferred Apartment Communities, Inc. (“Preferred Apartments”).
Founded in 2011, Preferred Apartments is a US-based Real Estate Investment Trust (“REIT”) that predominantly owns class-A multifamily properties and grocery-anchored shopping centers in the Sun Belt region. More specifically, the company owns (i) 11,400 multi-family units that were 96.8% leased at an average rent of $1,400 per month and (ii) 54 shopping centers were 91.1% leased with Publix and Kroger as the primary anchors—with more than 80% of its properties in Florida, Georgia, Texas, North Carolina, Virginia, and Tennessee.
While the company’s portfolio is largely located in strong submarkets and comprised of assets that provide predictable cash flows, Preferred Apartments has taken a less traditional route to accumulate these investments. To wit, at its inception, the company was managed by an external adviser that pursued
a strategy of issuing substantial amounts of preferred equity to fund the acquisition of a wide set of property types (e.g., multi-family, retail, office, student housing, etc.). The company also engaged in making selective loans for new construction, oftentimes with an option to acquire the properties from the developer upon completion…” (Click here to see the full text)
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Based on our calculations, Preferred Apartment Communities, Inc. was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. APTS was in 13 hedge fund portfolios at the end of the first half of 2021, compared to 7 funds in the previous quarter. Preferred Apartment Communities, Inc. (NYSE: APTS) delivered a 14.15% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
