The Phoenix Play

Real estate investors THOMAS BOHJALIAN and JASON YABLON find bargains in luxury shopping centers and other unappreciated properties across America.

- William Baldwin

At the glamorously landscaped mall on Sand Hill Road in Silicon Valley, shoppers stroll through the Hermès and Peloton outlets, jockey for a seat in the showroom Teslas and wait in a long line stretching out from the bakery. But is this hangout for the rich doomed? The very venture capitalists and Python programmers who pour dollars into it on weekends spend their working hours on schemes to extend e-commerce and make malls obsolete.

Ask the two guys who pick common stocks for the Cohen & Steers Quality Income Realty Fund, Thomas Bohjalian and Jason Yablon. They trade real estate investment trusts, which are pools of properties like stores and office buildings.

They have a knack. Over the past decade this $1.5 billion (net assets) closed-end fund has delivered a return averaging 21% a year, six percentage points ahead of the S&P 500. That return was helped, but only somewhat, by leverage; it’s after deducting a hefty 1.3% in expenses.

Three years ago, when REITs with retail assets looked cheap in relation to their earnings, Bohjalian and Yablon started selling them off. Counterintuitively, they added expensive REITs, like Equinix, which owns data centers, and Invitation Homes, which rents houses.

The bet on growth paid off. But now, with Wall Street even more in despair about the collapse of traditional retailing, the C&S pair are making another contrarian move. They’re doing a value play. They’re adding retail assets to the portfolio.