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American Century Investments V.P. Steve Brown on how investors can gain from investing in real estate.
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-- -- Our Steve Brown says now is the best time to invest in real estate but in a certain way he's got two funds to prove that -- are outperforming their benchmarks and the S&P 500 this year.
Steve is the manager of American century's global real estate and real estate American real estate funds he's joining us now.
In a Fox Business exclusive.
The pitch for reits right now because the economy is still a little unsure unsteady and we continue to see.
The op housing market not look like it's flexing any kind of muscle so why ivory snow okay well we're seeing today is a note the very inching and it.
Constructive interest rate environment the Fed reserve -- keep rates low for a long time to stimulate the economy.
In commercial real estate and reits -- -- beneficiary of this trend they're benefiting from.
Cap rates improving and commercial real estate in the cost of barring on good quality real estate is going down so reits this year up about eight or 9%.
Because they're net accident for shares are rising because of partly the Fed's policy of keeping interest rates low for prolonged period of time.
Say that he defected keep rates -- -- consider -- for your portfolio there's going to be a beneficiary.
And a benign interest rate possible let's take a look at your American -- real estate fund that is US centric and you've got a very nice performance here three years.
Up 29%.
Just over the past year up about 12% your global fund that's slightly less exciting here but we still have a pretty decent number here.
Global fund down 2% year over year but year to date up eight point 4% so he managed -- race.
Some earlier shaking -- there.
What's in -- -- that that you feel is really important right now can you -- two names from the American -- to start to pick one idea the best names like right now okay.
But today as we've gotten the fund I wondered B Simon Property Group and that's the largest owner of malls in the United States.
And they're benefiting from a trend and whether it's the top 1%.
The top 10% of the top 20% of people in the country have discretionary income and they're spending it and -- -- them on -- shopping at a Nordstrom's or Macy's or dealers or have you.
-- at the malls are getting comp store sales of 678%.
Growth.
In a Communist -- by two or two and a half.
Where the wal marts the targets of the world their content ourselves or our flatter that's because -- average -- -- is being hurt by higher food prices and gas prices historically.
And so the malls.
Catering to the higher end shopper.
-- good sales that's what sun is up fifteen or 16% -- -- -- so interestingly enough yes you feel that the higher and consumer is lifting up -- Simon property for -- and yes what about companies like -- right.
Okay this office property -- Kilroy is based in California.
And we like and it's been a winner further fund this year because they've been fit benefiting from the boom in northern California.
FaceBook came public many companies came public in northern California this year.
And has been above average employment growth and income growth in northern -- for us all hear about on Stuart Varney is that California is going down the troops back flat that I I understand the basis for that.
But northern California seeing above trend economic activity.
Saudi do you have concerns -- the state budget and perhaps the job growth in Southern California but stories and focused.
And -- office buildings in northern California Silicon Valley as well Seattle accident but benefiting from the tech.
Bloom again well if you also have -- global fund and I'm interested to see where you see pockets of strength.
Okay for the global fund is about nine or 10% this year and where we've seen strength is in some of the Asian markets whether it's China.
Hong Kong -- some of the Asian economies because they've been relatively immune to the weakness in.
And they have budget surpluses so we've seen properties.
And for up -- -- is -- up when he 25% year to date you've got wharf holdings you've got.
Hang lung property yes they're both based in Hong Kong but they have -- both -- Hong Kong and China.
And they've benefited from a reasonably strong economy there and those stocks many stocks major trading at ten to twenty can discount -- -- because they did poorly last year in the sell off.
But this year they came in the market they're down they were trading at face any five cents to eighty cents the dollars they are cheap and those counties are picking up.
Steve Brown good to see you can thank you both funds doing quite well right now watching this very closely real estate who would -- -- all you hear the bad news bears -- back out.
The situation that we see with housing prices think -- -- -- yes it's always a treat everybody -- -- manager of American century's real estate and global real estate funds.
