Real Estate, Internationally-Speaking

02/09/2007 12:00 am EST


Bryan Perry

Editor, Cash Machine, Premium Income, Quick Income Trader, Instant Income Trader

While real estate in the US may be under duress, Bryan Perry finds big opportunities internationally. Here, he recommends a real estate fund plying its trade around the globe and paying a very attractive dividend...

"The Fidelity International Real Estate Fund (FIREX) has a market cap of nearly $1 billion. The strategy here is to invest primarily in non-US securities investing at least 80% of assets in securities of companies principally engaged in the real estate industry and other real estate-related investments, and allocating investments across different countries and regions relative to the size of the international real estate securities market as a whole.

"The fund pays a dividend yield of 8.51%, the highest I could find in the sector. Now a good chunk of that yield is made up of year-end capital gains, but given the performance history of this fund--and trusting that my bullish call on the global real estate market is correct for 2007--we can expect a similar payout this year. Most global REITs are designed for almost pure growth, so finding anything above 4% is a bonus in this white-hot sector.

"The FIREX fund is focused on office properties more than on other types of brick-and-mortar properties--mainly because office rents are showing the greatest room for upside adjustments by the property owners given the strength among industries like financial services, insurance, accounting, and banking institutions. Prime office buildings are commanding high prices per square foot and the quality of tenants is rising, resulting in solid leases with a much lower risk of broken contracts.

"The rapid adoption rate of the REIT structure around the world is like getting in on the ground floor for income investors. At a time when most Americans are feeling as if the US real estate markets have run their course for now, we'll maintain a strong real estate component by buying professionally managed REITs in the Far East, Latin America, and elsewhere around the world. This is truly a mega-trend. I'm excited to enter this promising sector at a time when most of the hot real estate funds are consolidating their 2006 gains. If you believe (as I do) that we need to diversify some of our assets and move away from US dollar-denominated investments, then this is a great place to begin.

"I recommend taking a full 3% position in FIREX to initiate a position in global real estate."

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