Real estate fund’s manager fleeing REITs tied to apartments

Real estate fund’s manager fleeing REITs tied to apartments

Kenneth Heebner, the manager of the top-performing real estate mutual fund over the last 10 years, said the economic damage from high-risk mortgage defaults is going to get worse.

“We have a trillion dollars of subprime mortgages, and we’re going to have huge defaults,” Heebner, 66, said in a telephone interview from his office in Boston. “If you’re looking at the housing market, it’s not the darkest before dawn, it’s the darkest before pitch black.”

Heebner, cofounder of Capital Growth Management, has been selling shares of real estate investment trusts that buy apartments because they are no longer cheap. At year-end, his CGM Realty Fund had 35 percent of its assets in REITs. He said he had made a “significant reduction,” though he would not be more specific.