Ryan Dobratz, co-manager of the $287 million Third Avenue Real Estate Value fund, is navigating turbulent markets with a long-term, value-focused approach. Despite the fund being a top performer over the past three years, 2026 has been challenging, with a year-to-date loss of 12% through March 30.

Dobratz attributes the slowdown to several headwinds, including geopolitical tensions, interest-rate fluctuations, and concerns over artificial intelligence disrupting real estate services. However, he views this downturn as a buying opportunity for investors focused on well-capitalized companies trading at significant discounts to their long-term value.

Unlike typical real estate funds that focus on REITs, Third Avenue invests in operating companies across the residential value chain, commercial real estate, and real estate services such as brokerage and management. These companies retain capital and reinvest in their operations, giving them a structural advantage over REITs, which must distribute net income.

The fund maintains a low turnover strategy, with an average holding period of five to six years. Only 8% of its portfolio overlaps with the MSCI ACWI IMI Core Real Estate index, meaning performance may diverge from the benchmark in any given period. Dobratz emphasizes that consistent long-term performance, not constant short-term wins, is the fund’s primary goal.

Performance has been affected this year by investments in real estate services companies, international markets, and exposure to Fannie Mae and Freddie Mac. Interest-rate volatility has also impacted valuations due to real estate’s sensitivity to financing costs. Despite these challenges, the portfolio trades at roughly a 30% discount to estimated net asset value, a level rarely seen in the past 15 years.

The fund has held positions in Fannie Mae and Freddie Mac since 2020, following regulatory changes that allowed these government-sponsored enterprises to retain capital. Today, their combined net worth approaches $180 billion, and stress tests suggest they would remain profitable even in severe economic downturns.

In residential real estate, Dobratz highlights homebuilders like Lennar and PulteGroup. Lennar has spun off land assets to reduce balance-sheet risk and now trades near book value. PulteGroup’s Del Webb subsidiary benefits from demographic trends in the 55+ market, providing high-demand, amenity-rich communities. Manufactured-home builder Champion Homes also stands to gain from potential regulatory changes increasing production flexibility.

Single-family rental companies, such as American Homes 4 Rent and Invitation Homes, face legislative constraints, limiting capital inflows for build-to-rent properties. Yet their discounted valuations present potential opportunities for patient investors.

Outside residential real estate, Dobratz favors CBRE Group, which he views as well-positioned to benefit from AI-driven efficiencies in complex transactions, along with recurring revenue streams and a strong balance sheet. U-Haul Holding is another pick, combining moving services with self-storage, a high-value asset often overlooked by REIT-focused investors.

Internationally, Third Avenue looks to developed markets such as the U.K., Australia, Hong Kong, and Singapore. Dobratz sees opportunities in self-storage platforms and other undervalued assets, citing Big Yellow Group in the U.K. as an example, trading at an attractive implied capitalization rate.

Overall, the fund’s strategy relies on deep research, a focus on financially strong companies, and patience. By targeting undervalued opportunities in both domestic and international markets, Third Avenue aims to outperform over the long term, even amid short-term volatility.

For investors willing to endure temporary downturns, Dobratz sees 2026 as a rare moment to acquire high-quality real estate assets at substantial discounts, setting the stage for potential long-term gains.