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A Real Estate Magnet

Value investor John Rogers Jr. thinks this angst-ridden market is a fine time to buy "solid franchise" businesses. He has stuck to that strategy at Ariel Capital Management in Chicago--where he's chairman and CEO--and it has worked: In 2001, Ariel's Mid-Cap portfolio posted a gain of 17.2%, compared with a loss of 11.9% for the Standard & Poor's 500-stock index and a 2.3% gain for the Russell Mid-Cap Value Index. Ariel's $7.5 billion portfolio was helped by such stocks as International Game Technology, up 60% in 2001, and ServiceMaster, up 25.5%.

What's Rogers' favorite now? You've probably never heard of it: Big Board-listed Jones Lang LaSalle (JLL), a provider of real estate and investment-management services to multinational companies, including Microsoft (MSFT), Bank of America (BAC), and Rockwell Automation. Jones serves not only as broker but also as manager for clients' properties worldwide. Multinationals now tend to outsource the operation of their real estate properties--a boon to Jones, says Rogers. Jones operates in 100 cities in 33 countries. Ariel has raised its stake in Jones to 17.7%, up from 6.2% in September. The stock hit a low of 12 in March, 2001.

Jones lost 55 cents a share last year, on sales of $881 million, in part because of the economic slump. Now trading at 17, Jones sells at just over 10 times estimated 2002 earnings of $1.65 a share, on revenues of $900 million, notes Franklin Morton, Ariel's research director. In 2003, he sees earnings rising to $2, on sales of $955 million. Ariel's 12-month price target for the stock is 27. By Gene G. Marcial

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