How and when to invest in real estate

Corrado Russo, managing director of investments at Timbercreek Asset Management, has been in the industry for more than 15 years. He manages the Timber-creek Global Real Estate Fund.

Q: How do you choose investments?

We like companies that own great properties in attractive markets, have management teams that are good stewards of capital and trade below fair value. If you’re considering the office market, look at underlying job growth. Assess if that location attracts a proper talent pool. In the retail sector, you want to understand wage inflation, consumer confidence and unemployment rates.

On the residential/rental side, you must again look for job growth. For example, we’re currently interested in the southeastern U.S. because a lot of manufacturing plants are moving there.

Read: Canada’s top 10 cities to buy real estate in

It’s also more attractive to buy properties in areas that have minimal available land. Such areas are either water-locked (e.g., Sydney, Australia), or fully developed through retail and office nodes. For industrial and commercial real estate, we like Singapore because it’s a gateway to Asian emerging markets. Compared to emerging markets this year, Singapore has higher returns, higher dividends and lower volatility. It also displays more stable economic fundamentals.

Q: How do you determine when to buy?

Let’s say you could buy office buildings in New York and they’re trading at 4.5% cap rates. Or, you could buy a U.S. REIT like SL Green or Boston Properties. If a REIT’s trading at a 20% discount to NAV, that implies a cap rate north of 5%, and you’re getting a better return. Real estate has a massive private market you can use to judge whether you’re overpaying in the public markets.

Read: Canadian REITs to outperform in 2015

Read more: HOW TO INVEST IN REAL ESTATE