AEW Capital Management, managed by Jeffrey Furber, has recently submitted its 13F with the U.S. Securities and Exchange Commission for the reporting period of June 30, 2015, revealing ownership of a public equity portfolio valued at $4.50 billion, down from $4.97 billion at the end of the previous quarter. In this article, we will look into AEW Capital Management’s top three REITs going into the third quarter of 2015, which include Simon Property Group Inc (NYSE:SPG), Equity Residential (NYSE:EQR), and Boston Properties, Inc. (NYSE:BXP).
AEW Capital Management provides real estate investment management services to investors around the world and has around $47.9 billion in real estate assets and securities. Jeffrey Furber acts as the firm’s CEO, while AEW’s equity portfolio is managed by Matt Troxell, who serves as the Senior Portfolio Manager and oversees AEW’s U.S. real estate equity securities portfolios as well as securities teams in North America, Europe and Asia.
We track hedge funds and other prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about six basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 65 percentage points (123% return vs. S&P 500’s 58% gain) over the last 35 months (see the details here).
Having clarified that, let’s now look at Simon Property Group Inc (NYSE:SPG), which was the top REIT stock pick of AEW Capital Management at the end of the second quarter of 2015. According to the fund’s 13F filing, it held a total of 2.97 million shares of the REIT, with a market value of $513.89 million, representing 11.43% of its portfolio. This is after the fund reduced its stake in the stock by 40,300 shares during the second quarter. The real estate company recently issued senior notes valued at $1.1 billion. The sale will be effected by the company’s subsidiary Simon Property Group, L.P., which will be issuing $500 million worth of notes due on September 1, 2020, and another $600 million due on September 1, 2025. Simon Property Group Inc (NYSE:SPG) has delivered a solid performance over the past year, gaining 14.04%, including 5.23% year-to-date. At the end of the second quarter of 2015, Forward Management, headed by J. Alan Reid, Jr., held a total of 35,493 shares with a market value of $6.14 million after reducing its stake by 1,000 shares. Waratah Capital Advisors, managed by Brad Dunkley and Blair Levinsky, held a total of 41,050 shares with a market value of $7.10 million. The fund was quite bullish on the stock, adding 29,625 shares to its stake during the quarter.
The second-biggest REIT holding of AEW Capital Management at the end of the second quarter was in Equity Residential (NYSE:EQR), in which it held 4.22 million shares valued at $296.19 million, representing 6.59% of its portfolio. The stock’s performance has also been attractive, with it ranking as a stock with high earnings per share growth, having posted 54.80% growth over the past five years. This year, the stock’s share price has gone up by 5.99%, to go along with a 16.85% rise over the past year. At the end of the second quarter, the activities of different hedge funds relating to Equity Residential (NYSE:EQR) were varied, including several new purchases alongside some selling. At the end of the second quarter, Matthew Tewksbury‘s Stevens Capital Management held a total of 122,070 shares of the company with a market value of $8.57 million after reducing its position by 158,164 shares. Seminole Capital (Investment Mgmt), led by Michael Messner, on the other hand held a total of 95,886 shares valued at $6.73 million, having opened a new position in the stock during the quarter.
Finally, let’s look at Boston Properties, Inc. (NYSE:BXP), in which AEW Capital Management held 2.41 million shares valued at $291.41 million, having raised its stake in the stock during the quarter by 8%. Its position in the stock represents 6.48% of its total portfolio, up from 6.27% at the end of the prior quarter. The real estate company announced a dividend of $0.65 to stock holders of record as of June 30, 2015, with the payment made on July 31, 2015, which translates to a 2.08% annualized dividend yield. During the second quarter, Boston Properties, Inc. (NYSE:BXP) initiated three major development projects in Waltham, depicting a focus on long-term at the expense of short-term benefits. The stock has lost 6.24% in value since the beginning of the year, perhaps reflecting that long-term focus, to the detriment of its near-term stock performance. At the end of the second quarter, Stevens Capital Management held a total of 129,667 shares with a market value of $15.70 million after adding 36,171 shares to its position in the stock during the quarter.