The 2014 All-America Research Team: REITs, No. 3: Jeffrey Spector & team

<The 2014 All-America Research Team Jeffrey Spector & teamBank of America Merrill LynchFirst-place appearances: 5

Total appearances: 20

Team debut: 1974

Under the direction ofJeffrey Spector, Bank of America Merrill Lynch’s squad repeats in third place. “Jeff has a good team of seasoned individuals that complement his strengths well,” remarks one admirer of the nine-strong crew. Spector and his colleagues have a mixed outlook on the prospects for U.S. real estate investment trusts. On the plus side, they see “capitalization rates remaining sticky in the direct market into 2015, even with higher rates,” the team leader reports, “and we continue to believe dividend growth will remain a key investment theme supporting REITs, which have sustainable and growing dividends.” However, given the sector’s premium valuation — it outperformed the broad market by 5.8 percentage points year to date through mid-September, climbing 13.1 percent — they forecast that REITs will lag the broader market as the U.S. economy continues to gain strength. As a result, they prefer names that have the most leverage to an improving economy, such as those with development pipelines, material occupancy upside and the ability to push rents quickly once the recovery picks up steam. One example is Palo Alto, California–based Essex Property Trust, whose West Coast–focused apartment portfolio the researchers expect to continue to benefit from positive fundamentals into 2015. Another is Highwoods Properties of Raleigh, North Carolina, manager of an office portfolio and land bank that they deem poised to reap the rewards of outsize economic, employment and population expansion in the U.S. Southeast.