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The 2014 All-America Research Team: REITs, No. 1: Stephen Sakwa & team

< The 2014 All-America Research TeamStephen Sakwa
& teamISI GroupFirst-Place Appearances: 5

Total Appearances: 6

Team Debut: 2009

At No. 1 on this lineup for a fifth year running is ISI Group’s six-strong squad captained by Stephen Sakwa. “He is often ahead of the market, has the best understanding of management teams and can deliver the best access to companies,” one investor says of the 47-year-old team leader. Sakwa, whom another supporter describes as “the most seasoned individual covering REITs today,” expects that cash flows for U.S. real estate investment trusts will continue to improve, since the supply-demand dynamic is healthy and will remain so as long as U.S. real gross domestic product posts gains of 2 to 2.5 percent and monthly jobs growth is about 200,000. In addition, he points out, low interest rates are supportive of improving real estate values. He and his colleagues foresee an 8 percent total return for the sector over the next 12 months. Year to date through mid-September, it gained 13.1 percent, besting the broad U.S. market by 5.8 percentage points. Among large-cap growth names, American Tower Corp. wins their favor. The owner and operator of broadcast towers trades at a lower cash flow multiple than the REIT average, explains Sakwa, and has funds from operations that should expand at twice the industry average. Moreover, the Boston-based REIT’s long-term performance drivers are intact, he advises, given the global development of fourth-generation wireless networks. Noting that high-end hotel supply remains muted, the researchers also tout luxury operators LaSalle Hotel Properties of Bethesda, Maryland, and Strategic Hotels & Resorts of Chicago. Finally, the squad also gives the nod to San Francisco–based Prologis, whose portfolio includes thousands of logistics and distribution facilities. “The U.S. industrial fundamentals continue to improve,” says Sakwa, “and the pace of new supply means that rents should continue to rise.”

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