Rodriguez |
Joe V. Rodriguez, Lead Portfolio Manager of AIM Real Estate Fund and AIM Global Real Estate Fund
[January/February 2007]
By Jada A. Graves
Joe V. Rodriguez, lead portfolio manager of AIM Real Estate Fund and AIM Global Real Estate Fund, watches as funds continue to flow into the industry and the REIT market continues to amaze Wall Street pundits with its resiliency. Yet, he remembers when he was hard-pressed to sell shares in a fund invested primarily in real estate.
"Early in my career, many things in the economy were uncertain as a result of the oil price collapses of 1982 and 1986," Rodriguez says. "These factors helped produce a bust in real estate values in Texas as well as the rest of the Southwest. I had to be a cheerleader to get investors to think about the real estate industry differently—to get them focused on the future rather than the past. At the time, many investors didn't want to have anything to do with real estate, but a lot of times that's exactly when you should get into it, due to the momentum of dynamics and recovery."
Equipped with a B.A. in economics and finance as well as an M.B.A. in finance from Baylor University, Rodriguez had a stint in corporate and international banking before migrating to real estate investment in 1988. He began doing real estate forecasting and asset underwriting for various organizations, using his academic background to question what he calls the "disconnect" between economics, finance and appraisals.
Taking AIM
AIM Real Estate Fund and AIM Global Real Estate Fund are the two open-ended total return funds within AIM Investments' suite of five real estate funds. Rodriguez has overseen the management of both since their inception with the goal of beating their benchmarks, which as of November 2006 were the FTSE NAREIT Equity REIT Index and the FTSE EPRA/NAREIT Global REIT Index.
Both funds are managed with the philosophy that the relative success of property-linked investments and REITs is dependent on management ability and asset quality, and it's a philosophy that dictates Rodriguez's stock selection as well. "When we start creating a portfolio, we create a fundamental analysis of every company," Rodriguez says. "We screen each company for underlying property market strength, asset quality, managerial expertise and balance sheet flexibility. Our selection has nothing to do with price, but quality as we define it."
| Top Five Holdings |
| Company |
% of Portfolio |
| Simon Property Group |
6.33% |
| ProLogis |
5.86% |
| Vornado Realty Trust |
5.37% |
| Host Hotels & Resorts |
5.18% |
| Equity Residential |
4.74% |
| Top Five Sectors: |
| Sector |
% of Portfolio |
| Retail |
23.21% |
| Office |
19.39% |
| Residential |
16.25% |
| Lodging/Resorts |
11% |
| Industrial |
7.34% |
Next is an examination of prospective companies' relative value. "We're primarily looking for companies that will grow faster than their peers and companies that the sell side has underestimated their growth potential," he continues.
AIM Real Estate Fund started in May 1995, but is now closed to new investors. At any given time, this fund has an average of 60 holdings and a 70 percent to 80 percent REIT allocation, Rodriguez says. "This fund generally focuses
on equity REITs in the United States, because we think they offer superior risk adjusted returns."
| Class A Shares Performance |
|
Max Load (5.5%) |
NAV |
| Inception |
13.84% |
$14.51 |
| 5 Years |
23.29% |
$24.68 |
| 3 Years |
26.32% |
$28.72 |
| 1 Year |
22.08% |
$29.20 |
A significant REIT allocation in the portfolio has helped boost performance. Compared to its peer group, Rodriguez says AIM Real Estate Fund Class A shares over the last five years are in the top 10 percent, the top 15 percent over the last three years and in the top 20 percent in the last year [as of Sept. 30, 2006] in Lipper's real estate category. AIM Global Real Estate Fund was in the top 10 percent as of Sept. 30 for the same Lipper category.
AIM Global Real Estate Fund, founded in April 2005, is composed of both domestic and global securities. At any given time, Rodriguez says 40 percent to 60 percent of the fund's 83 holdings are REITs. With January's introduction of U.K. REITs and the expected enactment of Germany's REIT legislation waiting in the wings, Rodriguez says he has noticed a difference in investor sentiments. "We have seen some of the arbitrage evaporate surrounding foreign investment; however, our strategy doesn't change. We will continue to focus abroad on companies that are asset-rich and are primarily rent collectors."
This focus on its 90-asset rich companies, as Rodriguez calls them, has buoyed the global fund's performance, with more than $307 million in total net assets as of Sept. 30, 2006, and a $14.67 NAV price as of Nov. 3, 2006. The Fund's NAV has steadily risen since its inception last year, starting out with a $10.25 NAV as of May 31, 2005.
To complement its funds' foreign allocations, Rodriguez says AIM Investments and its sub-advisor INVESCO have research professionals working worldwide. "We have a research base with people located on the ground, in places like Atlanta, Hong Kong, London, Madrid, Munich and Paris. This allows our investors to take advantage of resources around the globe. Investors are looking for diversity, and what better example of it can you find."
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"Real estate was a misunderstood and largely inefficient asset class," he says. "In the 1980s, there were popular notions that did not hold up under rigorous econometric and financial modeling. I began studying the industry in a more detailed fashion and I thought that, in working with other professionals in the industry, I could make a positive contribution to investor understanding of the asset class."
By 1990, Rodriguez joined the team at INVESCO Real Estate, the sub-advisor for the AIM Real Estate Fund and AIM Global Real Estate Fund. Managing real estate securities assets for AIM Investments and INVESCO, Rodriguez moonlighted as co-author and co-editor of numerous industry publications, including the 1997 book "Real Estate Investment Trusts: Structure Analysis and Strategy."
Over the last several years, Rodriguez says his role has shifted from asset class advocate to manager of rising investor return expectations. In this capacity, Rodriguez has appeared as a real estate investment expert on CNBC and Bloomberg News.
INVESCO has approximately 180 real estate employees worldwide, in addition to the team of portfolio managers that work directly with Rodriguez on day-to-day management. That team includes James Trowbridge, James Cowen, Mark D. Blackburn and Ping Ying Wang. Rodriguez says his team has an average of 18 years of experience.
"I'm very fortunate to work with a collegial firm, and I owe a lot of my personal enjoyment and satisfaction to the teammates and partners I work with. For all of us, doing well for our clients is on the forefront of our minds."
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