At the end of January, the two 2024-2025 Applied Real Estate Investment Track (AREIT) student teams hosted their Spring Board Meeting. AREIT, the nation’s first graduate program of its kind, provides Wisconsin Real Estate graduate students with hands-on experience managing a live $2 million portfolio of real estate investment trusts (REITs).
Guided by the Isthmus Fund Board of Advisors—composed of senior REIT investment professionals—students develop real-world client-manager relationships while navigating the complexities of public securities investment. Throughout the year, they receive direct mentorship and strategic insights from industry leaders.
Due to high graduate student enrollment, two AREIT teams—Red and White—were formed, each with four members. The Isthmus Fund was split equally between them, with each team managing its respective portion. Their objective is to outperform the MSCI US REIT Index (RMZ) by 200 basis points or more. To achieve this, each team presented its distinct investment philosophy, process, and strategy to the Board for approval.
In November, members of the White and Red Teams attended the NAREIT REITWorld Conference in Las Vegas, where they participated in private investor meetings across various sectors. The final quarter of 2024 was marked by persistent inflation, shifting expectations for Federal Reserve rate cuts, and the Presidential elections. These factors contributed to upward pressure on the 10-year Treasury yield, triggering a REIT market sell-off in December.
Throughout the fall semester, both teams finalized their stock selections and were fully invested by year-end. During this period, they closely monitored evolving market conditions while actively managing their portfolios. The White Team’s portfolio is managed by Adam Bekx, Will Schmitz, Jimmy McGuire and Vedaant Goel, while the Red Team’s portfolio is managed by Micah Nelson, Owen Herzog, Sam Weber, and Sharan Mehra.
The White Team’s Strategy: The investment philosophy emphasizes identifying sectors with favorable supply and demand dynamics while considering valuation. At the stock level, the team targeted companies with attractive valuations and above-average growth. An in-depth analysis was conducted, considering Funds from Operations (FFO) growth, FFO multiples, Price/NAV, and PEG ratios, followed by an evaluation of management quality, balance sheet strength, and overall valuation. Corporate governance, ESG factors, and financial flexibility were key metrics, with a preference for low leverage and sufficient liquidity.
The Red Team’s Strategy: The Red Team, presented the early results of their relative value philosophy, which targets property sectors that exhibit growth at a low relative valuations using PEG ratios. Meanwhile, at a stock level, the Red Team targets stocks that demonstrate strong real estate fundamentals while trading at low relative valuations to their sector peers using historical Funds from Operations (FFO) multiple spreads. For example, if a stock historically trades at a 10% discount to the sector average FFO multiple, and it is currently trading at a 15% discount with no fundamental reason, the team views it as undervalued.
While the viability of this strategy remains to be fully seen with a completely built-out portfolio, both the team remains optimistic of the strategy’s potential to aid in achieving the goal of outperforming the RMZ index by 200 basis points. The White Team’s portfolio is managed by Adam Bekx, Will Schmitz, Jimmy MC Guire and Vedaant Goel, while the Red Team’s portfolio is managed by Micah Nelson, Owen Herzog, Sam Weber, and Sharan Mehra.
Next steps for the teams: With both teams’ portfolios fully constructed, each team will be responsible for actively managing their portfolios throughout the Spring semester. Portfolio management will include listening to the earnings calls of owned companies, monitoring the broader macro-economic and commercial real estate environment, and readjusting the portfolio based on revised company-level and property sector-level outlooks.
Additionally, the teams will stay disciplined with their exit strategies, adhering to calculated target share prices and revised assumptions. The students will be working alongside faculty coordinator Tim Pire and leaning on his decades of real estate experience to manage the portfolio and learn from real life examples of best practices. The next board meeting will be in April, where the teams will share their portfolio’s performance and lessons learned from the school year. Each team looks forward to another great semester of learning and humbly thanks the board, AREIT Alumni, and Graaskamp faculty for providing a positive learning experience for all.
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