AEW Capital Knows Real Estate and These Are Its Top Picks

Founded in 1981, AEW Capital Management is one of the oldest real estate-focused money management firm in the world. It is currently led by CEO Jeffrey ‘Jeff’ Furber, who also serve as the Chairman of AEW Europe. The parent company of AEW Capital Management, AEW Global, currently manages assets worth almost $55 billion and employees 600 people in 13 offices across the world.

According to AEW Capital Management’s recently-submitted 13F filing its long US equity portfolio was worth nearly $5 billion at the end of June and 93% of it included stocks from the real estate sector. The filing also revealed that during the second quarter the fund’s equity portfolio saw a modest quarterly turnover of 18.60%. In this post, we will take a look at AEW Capital Management’s top five equity holdings, which amassed 36.35% of the fund’s equity portfolio at the end of June.

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#5. Welltower Inc (NYSE:HCN)

– Shares Owned by AEW Capital Management (as of June 30): 3.88 Million

– Value of The Holding (as of June  30): $295.62 Million

AEW Capital Management inched up its stake in Welltower Inc (NYSE:HCN) by 2% during the second quarter, which helped the company to become the fund’s fifth largest equity holding at the end of June. Shares of the Ohio-based healthcare-focused REIT lost more than one-third of their value in the period between January, 2015 and February, 2016. However, they have recouped some of those losses in the past few months and are currently trading up by 8.81% year-to-date. Similar to stocks of most REITs, Welltower Inc (NYSE:HCN)’s stock has also  been beaten in the last two weeks amid fears of a rate hike from the Fed. However, analysts feel that investors are overreacting to the situation in the short-term, forgetting that Welltower has strong growth catalyst s in the form of an ageing population and its portfolio, which consists of top-notch properties, generates sufficient cash flow to more than cover the company’s debt obligations. The ownership of Welltower among funds covered by us declined marginally by one to 20 during the second quarter, though the aggregate value of their holdings in it fell by 9.7% to $630 million.

#4. Boston Properties, Inc. (NYSE:BXP)

– Shares Owned by AEW Capital Management (as of June 30): 2.3 Million

– Value of The Holding (as of June  30): $302.27 Million

AEW Capital Management  lowered its stake in Boston Properties, Inc. (NYSE:BXP) by 2% during the second quarter. Boston Properties, Inc. (NYSE:BXP)’s stock has appreciated by 6.65% so far in 2016 and recently made its lifetime high at $144.02. The REIT currently pays a quarterly dividend of $0.65 per share, which based on its last trading price translates into an annual dividend yield of 1.90%. On August 22, analysts at Evercore ISI downgraded the stock to ‘Hold’ from ‘Buy’, but upped their price target on it to $149 from $147, which represents a potential upside of 8.6% from its current trading price. During the second quarter, the number of hedge funds covered by us that were long Boston Properties declined by three to 18 and the aggregate value of their holdings in it fell by $30 million to $446.3 million.

#3. Prologis Inc (NYSE:PLD)

– Shares Owned by AEW Capital Management (as of June 30): 6.22 Million

– Value of The Holding (as of June  30): $305.09 Million

Prologis Inc (NYSE:PLD) was another stock in which AEW Capital Management reduced its stake by 2% during the second quarter. The stock of the logistics real estate company has performed remarkably well this year, appreciating by almost 24% so far in 2016. But this rally in the stock hasn’t reduced the attractiveness of its forward yield, which still stands at 3.15%. For its fiscal 2016 second quarter, Prologis Inc (NYSE:PLD) once again reported better than expected numbers ,in July. However, since it didn’t raise full-year guidance, it prompted several analysts to lower their rating on the stock. This list included, analysts at Credit Suisse Group AG, who on July 20, downgraded it to ‘Neutral’ from ‘Outperform’ while keeping their price target on it unchanged at $48, which at current price represents a potential downside  of 10% in the stock. The popularity of Prologis among funds covered by us saw a notable increase during the second quarter with its ownership among them rising by four to 23 and the aggregate value of their holdings in it shooting up by over $100 million to $590.74 million.

#2. Public Storage (NYSE:PSA)

– Shares Owned by AEW Capital Management (as of June 30): 1.28 Million

– Value of The Holding (as of June  30): $327.95 Million

While AEW Capital Management lowered its holding in Public Storage (NYSE:PSA) by 4% during the second quarter, several hedge funds covered by us initiated a stake in the company during that time. The ownership of Public Storage (NYSE:PSA) among funds tracked by us rose by 10 to 27, while the aggregate value of their holdings in it jumped by $207 million to $1.15 million during the April-June period. Funds that initiated a stake in the company during that quarter included Anand Parekh‘s Alyeska Investment Group and billionaire Jim Simons‘ Renaissance Technologies. Public Storage is the only stock covered in this article which is currently trading in the red for 2016, down 13.15% year-to-date. A large part of the decline that the stock has seen this year has come in the current quarter. Several analysts who track Public Storage think that despite this recent downtrend, the stock is still trading expensively and can see further downside. On September 12, analysts at KeyCorp reiterated their ‘Underweight’ rating on the stock while lowering their price target on it to $205 from $220.

#1. Simon Property Group Inc (NYSE:SPG)

– Shares Owned by AEW Capital Management (as of June 30): 2.65 Million

– Value of The Holding (as of June  30): $575.46 Million

Simon Property Group Inc (NYSE:SPG) continued to remain AEW Capital Management’s top stock pick at the end of June, despite the fund lowering its holding in the company by 2% during the April-June period. Since making its lifetime high at $229.10 in early-August, Simon Property Group Inc (NYSE:SPG)’s stock has corrected quite a bit. Nevertheless, it is still trading up by 8.05% year-to-date. The REIT recently hiked its quarterly dividend by 3.1% to $1.65 per share, which based on its last trading price translates into a forward yield of 3.15%. For its fiscal 2016 third-quarter, analysts are expecting the REIT to report Funds from operations (FFO) of $2.68 per share on revenue $1.35 billion. For the same quarter of the previous year, Simon Property Group had reported FFO of $2.54 per share on revenue of $1.32 billion. At the end of June, there were 21 hedge funds covered by us that were long Simon Property Group with the aggregate value of their holdings in it amounting to $1.08 billion.

Disclosure: None