ThirdAvenuereal estateVal ueFund

Portfolio Manager Commentary INSTITUTIONAL: TAREX | INVESTOR: TVRVX

December 31, 2017 Michael Winer | Lead Portfolio Manager

Jason Wolf, CFA | Lead Portfolio Manager
Ryan Dobratz, CFA | Lead Portfolio Manager

Dear Fellow Shareholders: scaled back its position to realize some of the appreciation in
the stock price, but Westfield common remains a top 10
We are pleased to provide you with the Third Avenue Real
holding in the Fund. Given the scarcity value of Westfield?s
Estate Value Fund?s (the ?Fund?) report for the quarter
US and UK assets, and accelerating pace of consolidation in
ended December 31, 2017. For the 2017 calendar year, the
the class-A mall space, a competing bid cannot be ruled out.
Fund generated a return of +22.17% (after fees) versus
+11.39% (before fees) for the Fund?s most relevant The Westfield announcement caps off a year which
benchmark, the FTSE EPRA NAREIT Developed Index1. included: the Fund?s largest position being privatized at a
Not all years are likely to be as rewarding as 2017. In Fund substantial premium (Global Logistic Properties); one of the
Management?s view, a better gauge of performance is the top five positions announcing that it was exploring strategic
Fund?s long-term results where it has earned an annualized alternatives that could include a sale of the business (Forest
return of +11.20% since its inception in 1998. As highlighted City Realty Trust); two other businesses receiving take-over
in the chart below, this performance indicates an initial offers (Parkway, Inc. and Millennium & Copthorne plc); two
investment of $100,000 in the Third Avenue Real Estate other top five positions paying special dividends (Lennar
Value Fund would have a market value of more than Corp. and Land Securities plc); one top ten position
$775,000 as of year-end (assuming dividends had been undertaking an Initial Public Offering (Five Point Holdings);
reinvested), or more than double the amount the same and two other holdings completing spin-off transactions
$100,000 would be worth had it been placed into a passive (FNF Group and Vornado Realty Trust). Collectively, these
fund tracking the S&P 500 and held over the same time positions accounted for 37% of the Fund?s capital at the
period. beginning of the year (versus 3% for the Index) and the
events further solidify our long-held view that arbitraging
the difference between the public and private market values
for property can be a profitable endeavor.

Outside of the Westfield activity, the Fund was also active

this quarter in terms of re-stocking the portfolio with
securities that Fund Management views as some of the likely
contributors to performance in the years ahead. In fact, the
Fund made additions to each one of its key allocations
during the quarter including: (i) businesses involved with
long-term wealth creation (i.e., long-term compounders),
*Hypothetical investment made since Fund Inception (September 17, 1998)
(ii) residential related investments, (iii) special situations
Source: Morningstar
holdings, and (iv) select option strategies.
Activity
A long-term compounder added during the quarter was
In a year where resource conversion activity was abundant
Capit al and Count ies plc (?Capco?), a UK based real estate
(resource conversion is a term that we use at Third Avenue
operating company that owns assets in two prime London
to describe actions that control groups take to surface value
sub-markets (Covent Garden and Earl?s Court). For those
and most commonly includes mergers, acquisitions,
not familiar, Covent Garden is a district in West London that
privatizations, spin-offs, share repurchases, tender offers,
has been transformed into a leading shopping and
and special dividends), it was quite fitting that one of the
entertainment destination that attracts more than 40
most meaningful events occurred during the final weeks of
million visitors annually. Over the past five years, Capco?s
the year. In early December, West field Corp. (a long-time
management team (which is led by CEO Ian Hawksworth)
holding of the Fund that controls market-dominant malls in
has actively repositioned its holdings in the area to capture
key US & UK cities) announced that it had agreed to be
higher rents by adding more appealing retail and dining
acquired by Unibail-Rodamco (the largest European mall
options, as well as by opportunistically making ?tuck-in?
owner) in a cash-and-stock deal at a substantial premium to
acquisitions of additional properties on the estate.
prevailing market prices. After the announcement, the Fund
1 The FTSE EPRA/NAREIT Developed Real Estate Index was developed by the European Public Real Estate Association (EPRA), a common interest group aiming to promote,
develop and represent the European public real estate sector, and the North American Association of Real Estate Investment Trusts (NAREIT), the representative voice of the US
REIT industry. The index series is designed to reflect the stock performance of companies engaged in specific aspects of the North American, European and Asian Real Estate
markets. The Index is capitalization-weighted.
Please see Appendix for performance t able and informat ion.
2 The S&P 500 Index is an unmanaged index (with no defined investment objective) of common stocks. The S&P 500 Index is a registered trademark of McGraw-Hill Co., Inc.
Third Avenue Real Estate Value Fund | As of December 31, 2017
1
As a result, the company now controls more than 1.1 but fail to appreciate the underlying value of the platform.
million square feet of retail, office, and residential The reason is simple: many of the U-Haul self-storage
properties in the heart of London that seem well-placed facilities were only recently developed or acquired and are
with in-place leases that are nearly 40% below still in the process of leasing-up and stabilizing.
market-rents, thus providing additional upside as the rents Consequently, the portfolio was only 73% occupied at the
are ?marked-to-market?over time. end of the last quarter versus industry norms in the
90-95% range. It is our expectation that as these properties
Almost as valuable as Covent Garden is Capco?s stake in stabilize over the next few years, the occupancy rate will
Earl?s Court, the largest redevelopment site in Central increase, thus boosting cash flows to a level that would
London. Alongside its partners, Capco has received support more reasonable values for the portfolio
approvals to build more than 8,000 residential units and ($165-185 per square foot) leaving the rest of the business
100,000 square feet of commercial space on this 77-acre priced at an incredibly modest valuation (i.e., less than 5
site that is incredibly well positioned as it is bordered by times EV/EBITDA). Such a value doesn?t seem
the neighborhoods of Chelsea, South Kensington, and representative of what is truly a market-dominant
Fulham. The company is currently in the process of franchise that functions as a tax on goods and belongings
applying for a revised planning permission, which could see being moved day-in and day-out.
an increase in residential density and an additional
affordable housing component. Should the public markets not respond as this situation
develops, it would not surprise us to see the control group
Should Capco finalize the revised plans, it?s not (the Schoen family, which owns nearly 60% of the company
inconceivable that the company would sell stakes in the and has run day-to-day operations since its founding in
various development parcels, thus realizing the 1945) take steps to surface value. Such actions could
?higher-and-better-use?potential of its long-time land include simply improving disclosure around the real estate
holdings. The proceeds from these sales could then be component of the business, selling off additional land
reinvested in Covent Garden as Capco further transitions parcels (e.g., New York City or San Francisco sites), or
to becoming a more focused London ?specialist?such as its taking more drastic measures such as entering into some
peer Shaftesbury plc, which has historically traded at a sort of resource conversion activity around the real estate
premium to NAV as opposed to the significant discount at portfolio or entire business.
which Capco common traded at the time of purchase.
One company that has been engaged in resource
During the quarter, the Fund sold its position in the conversion for years is Wheelock & Company
common stock of Kennedy W ilson Holdings (?Kennedy (?Wheelock?), a Hong Kong based real estate operating
Wilson?), a US based real estate operating company that company that has been a long-term holding in the Fund and
has a portfolio of ?value-add?commercial properties, as highly profitable investment to date. Driving most of this
well as a sizable fund management business with more than appreciation has been Wheelock?s most valuable asset: its
$15 billion of third party assets under management. The 62% stake in separately-listed W harf Holdings (?Wharf?), a
company recently completed an acquisition of its European Hong Kong real estate company, which owns, manages, and
affiliate, which changed the investment thesis. As a result, develops a diversified portfolio of properties in Hong Kong
the Fund moved on for the time being. The proceeds from and China.
exiting the security were reallocated to the common stock
of a real estate related business that Fund Management During the quarter, Wharf completed a major corporate
has followed for a number of years: Amerco. restructuring that involved spinning-off its investment
property business to shareholders by forming another
While Amerco is not a household name, its largest and publicly-listed entity called Wharf Real Estate Investment
most valuable subsidiary, U-Haul International, is certainly Company (?Wharf REIC?) and refocusing the remaining
well-known as it is the leading provider of self-moving business around its development projects. Following the
services and supplies in North America with more than spin-off of Wharf REIC, the Fund purchased the Common
150,000 trucks, 100,000 trailers, and 40,000 towing Stock of Wharf Holdings, taking advantage of the
devices. In addition, the company has aggressively forced-selling that often occurs with spin-off transactions
expanded into the self-storage business by adding storage (e.g., index rebalancing).
facilities at its key locations over the past five years. As a
result, Amerco now has nearly 30 million square feet of Similar to Wheelock, we believe Wharf is extremely well
self-storage properties and controls one of the most capitalized, trading at a huge discount to NAV, with strong
valuable self-storage platforms in North America, further prospects to increase NAV by 10% or more per year once
entrenching itself as the ?go-to?provider of self-moving factoring in dividends. There is also a special situation
services by being able to offer reputable storage facilities element to the Wharf investment, as it is Fund
alongside its other offerings. Management?s view that the recent separation could have
been the first step in a two-step process that will
In our view, those that follow Amerco rightly recognize the streamline the overall corporate ownership structure and
strategic merit of adding self-storage space to its offering ultimately lead to a privatization of Wharf Holdings by

Third Avenue Real Estate Value Fund | As of December 31, 2017

2
Wheelock given the substantial overlap in business discount to NAV should an additional 50k jobs be added to
activities and operations. Fund management has a DC in the next five years). We view this as a ?win-win?as
historical perspective in this regard, as Wheelock & the Fund gets to buy more JBG Common should the
Company successfully privatized another long-time Fund discount to a conservative NAV estimate become more
holding, Wheelock Properties (Hong Kong) in 2010 at a compelling, while also getting to participate in the potential
substantial premium to market prices. upside of Amazon selecting DC without having to pay up
for it.
Another investment that ended up in the Fund after a
spin-off transaction earlier this year is JBG Smit h fundPositioning
Propert ies (?JBG Smith?). This US REIT was spun-out of
long-time holding Vornado Realty Trust as a After accounting for the most recent activity, the Fund
well-capitalized and more-focused owner of office and ended the quarter with approximately 42% of its capital
multifamily properties in the Washington DC area invested in property companies that are involved in
(including Crystal City and Pentagon City). The company long-term wealth creation. These holdings primarily
also controls land that can accommodate more than 18 include: CK Asset Holdings, Brookfield Asset Management,
million square feet of future development. With a Land Securities, Forest City Realty Trust, Westfield Corp,
substantial opportunity to boost cash flows within its Vornado Realty Trust, Wheelock & Co., and Henderson
existing portfolio (87% occupancy in the office portfolio) as Land. Each of these enterprises is incredibly
well as to profitably convert its well-located land bank to a well-capitalized, trades at a discount to NAV, and seems
higher-and-better-use, there are frankly few REITs that capable of increasing NAV by 10% or more per year
seem to have such a substantial opportunity in front of (including dividends) through further appreciation in the
them in terms of boosting NAV over the next 3-5 years. value of the underlying assets, as well as by undertaking
With that being the case, Fund Management has been additional development and redevelopment activities and
eager to add to its position in JBG Smith common at lower by making opportunistic acquisitions. Due to the
prices. transaction pending at Westfield, alongside the strategic
alternative process that is currently being undertaken by
There is one scenario where our current underwriting Forest City, the allocation to long-term compounders could
metrics for JBG Smith may prove far too conservative. If fall below 40% during the first half of 2018 but should be
Amazon were to select the Washington, D.C. metro area expected to be in the 45-55% range over the longer term.
for its widely publicized ?HQ2?search, JBG Smith will likely
be worth a lot more than our current estimates. The Fund also has 33% of its capital invested in real
estate-related businesses that have strong ties to the US
We haven?t been directly involved with the search process residential markets, such as timberlands (Weyerhaeuser &
but believe that it is logical for Amazon to diversify away Rayonier), land development (Five Point and Tejon Ranch),
from it existing West Coast presence, and there are only a homebuilding (Lennar Corp), title insurance (FNF Group),
handful of markets in other regions that can accommodate moving and storage (Amerco), and home improvement
its key requests (a metropolitan area of more than 1 million (Lowe?s). All of these businesses seem poised to benefit
people, a site that is connected to mass transit and would from a further recovery in housing fundamentals,
have 500,000 square feet of space available by 2019 with particularly from an increase in the construction of
the ability to add 8 million square feet over 10 years, an single-family homes and higher levels of residential
international airport within 45 minutes, and access to a purchase activity in the US.
highly educated labor pool with its intentions of hiring
50,000 employees over time). An additional 12% of the Fund?s capital is invested in
special situations such as Millennium & Copthorne in the
With these requirements in mind, Washington, D.C. seems UK, Trinity Place Holdings in the US, Wharf Holdings in
to rank near the top of the list. Should it ultimately be Hong Kong, and the Bank Debt of Neiman Marcus in the
selected for its second headquarters, JBG Smith is likely to US.
be a big winner as its Crystal City and Pentagon City The remaining 13% of the Fund?s capital is in cash &
locations are natural candidates for Amazon to utilize as it equivalents (e.g., short-term US Treasuries). It is our
initially relocates employees to the region. Further, JBG expectation that cash balances will continue to increase in
could be a terrific partner for Amazon to work with as it the first half of 2018, particularly if privatization efforts at
looks to build out additional space and accommodate the Westfield and Millennium & Copthorne are successful
company?s demand for modern and well-located property. (these collectively account for 6% of the Fund?s capital).
Should these deals close as proposed, the Fund?s cash
With that backdrop in mind, the Fund entered into an
balances may exceed 15% providing ample dry powder to
options strategy around its existing position in JBG
capitalize on the fresh opportunities as they arise. In the
Common during the quarter by selling put options (at a
meantime, the Fund maintains certain hedges, most
level where the Fund is willing to buy more stock even if
notably relating to its exposure to the Hong Kong Dollar,
Amazon doesn?t select D.C.) and using the proceeds to
and has options outstanding relating to JBG Smith as
purchase call options (at a price that would be a meaningful
outlined above.
Third Avenue Real Estate Value Fund | As of December 31, 2017
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 founder, Martin Whitman, acted as co-portfolio managers.
Michael Winer was the only investment professional
dedicated exclusively to the strategy until 2004. Jason
Wolf was then hired as Senior Analyst to spearhead the
Fund?s international efforts.Approximately 50% of the
Fund?s capital has been invested outside the U.S. for the
better part of a decade now, playing an outsized role in the
Fund?s returns. In 2006, Ryan Dobratz was hired as an
Analyst, working with the rest of the team (which is now
comprised of five dedicated members) to develop and
implement a more robust process of screening the
investable universe, underwriting new opportunities,
tracking existing holdings, and recycling capital within the
Fundupdate portfolio.
The additions of Jason Wolf and Ryan Dobratz transitioned
The Third Avenue Real Estate Value Fund was launched in
the Fund to a team-based approach that would prove more
1998 with a unique strategy. Unlike other offerings, Third
durable over the long-term (which has always been our
Avenue wanted to expand on its success in previous real
focus) and helped develop a well-defined (and repeatable)
estate and real estate related investments by dedicating a
process in order to further enhance results.
Mutual Fund to the sector that would:
The transition to a team-based approach was deliberately
1. Maint ain a Deep Value Focus by concentrating its
staged over the course of many years establishing Jason
capital on well-financed real estate and real estate
and Ryan as the ones to ?carry the torch?as the Fund
related businesses with securities trading at prices that
enters its 20th year of operations. While the current team
were substantially below their takeover or liquidation
has worked together for more than a decade now, close
values (i.e., private market values or NAV), as well as
followers of the Fund know that Michael began delegating
other bargain priced securities across the capital
portfolio management responsibilities when Jason was
structure.
added as co-Portfolio Manager in 2010 and handed over
2. Emphasize Tot al Ret urn with a bias towards capital further roles when Ryan was added as a Portfolio Manager
appreciation over current income with the view that in 2013. Jason and Ryan have been handling most
this was a more effective way to compound capital day-to-day operations of the Fund since the beginning of
over time. As a result, the Fund intended to focus more 2015. Michael?s role has diminished while he focused
on real estate operating companies (that could retain attention on corporate activities involving certain positions
their cash flow and reinvest in the business) as opposed in the Fund.
to REITs (which are required to distribute their
With the handoff largely being complete for the better part
earnings and largely depend upon raising new capital
of two years now, Michael will formally retire from his
to expand their business).
Portfolio Management role of the Fund at the end of
3. Ut ilize a Flexible Mandat e that allows the Fund to February. As part of the plan that we have had in place for
invest in a wider set of real estate companies than more than ten years, Michael plans to remain a significant
peers who tend to only focus on companies included in investor in the Fund (each portfolio manager has more than
relevant benchmarks. With the ability to invest in real $1 million invested in the strategy) and he expects to retain
estate operating companies, REITs, and real his seats on the Board of Directors at Five Point Holdings
estate-related businesses, the Fund?s investable and Tejon Ranch (both long-term holdings of the Fund).
universe is some two to three times larger than most
Portfolio management changes like this are oftentimes a
real estate Funds.
reason for investors to give pause. For those that do, we
4. Be Act ively Managed by concentrating the Fund?s believe that they will recognize that (i) the Fund has been in
capital around a select set of securities (30-40 transition for more than a decade based on a well-defined
positions) irrespective of property type or region, as succession plan and (ii) that the Third Avenue Real Estate
well as by holding cash when opportunities meeting Value Fund is a more compelling offering today than it was
Third Avenue?s strict value criteria were not available, in its early years.In fact, the transition to a team-based
and occasionally implementing options strategies to approach, combined with the adoption of a more robust
hedge certain exposures and enhance the risk-adjusted and repeatable process, has proven to enhance returns.
return profile of the Fund.
With nearly twenty years of performance, we think that
While the strategy hasn?t deviated since inception, the the case for Third Avenue?s unique approach to investing in
process used to implement the approach has improved real estate securities has been made. To wit, the Third
immensely over the years. In the early days (1998 to 2000), Avenue Real Estate Value Fund is one of the top performing
the Fund?s original architect, Michael Winer, and the Firm?s global real estate funds (i.e., top decile) over the past

Third Avenue Real Estate Value Fund | As of December 31, 2017

4
1, 3, 5, 10, and 15 year periods as well as since the 1998 team overseeing our proven process--we believe that the
inception. Despite the long-term results, the differentiated odds of achieving returns similar to the Fund?s long-term
performance seems to be becoming more apparent in results (if not better) are stacked in our favor.
conjunction with the process improvements that have been
We thank you for your continued support and look forward
made in recent years. As a matter of fact, the Third Avenue
to writing to you again next quarter.
Real Estate strategy has been awarded more Lipper
Awards in the past five years (2014, 2015, 2016, and 2017) Sincerely,
than the first fifteen (the Lipper Fund is awarded to Funds
The Third Avenue Real Estate Value Team
that have ?excelled in providing consistently strong
risk-adjusted performance relative to its peers?per
Lipper?s parent company Thomson Reuters). For those that
truly focus on results, we believe this is strong evidence
that the strategy is adding even more value today than it
did in its early years. Michael Winer Jason Wolf Ryan Dobratz
With that being the case, one should not expect any Lead Portfolio Manager Lead Portfolio Manager Lead Portfolio Manager
material changes to the strategy or process as we enter
2018, especially when considering that Jason and Ryan
have worked together for more than a decade and a
number of the enhancements that they set out to
implement have already been reflected in the portfolio for
a number of years. These include: (i) more prudent
concentration, (ii) a focus on individual securities as well as
thematic opportunities, (iii) a further emphasis on real
estate related businesses with strong franchises, (iv) a
willingness to have the portfolio ?fully invested?when
opportunities are abundant (i.e., cash at less than 10%), and
(v) positioning the portfolio to ?protect?capital in a rising
rate environment and potentially even benefit from it.
There are two areas, however, where we have made
further enhancements that should have an impact in 2018.
One, we have continued to strengthen the ?bench?of the
Third Avenue Real Estate team. In that regard, we are
pleased to report that Steve Bakke, CFA joined the Real
Estate group in September as a Senior Analyst. Steve was
previously at Surveyor Capital (a subsidiary of Citadel) and
has more than a decade of experience in real estate
securities, both in the US and internationally. Steve is the
most experienced hire since Jason joined the team in 2004,
and we are excited to have him on board as it?s a rare
opportunity to find individuals who share our passion for
both real estate and value investing.
Also of note, Third Avenue Management plans to launch a
?clean?share class for the Third Avenue Real Estate Value
Fund in the first quarter of 2018. The registration process
is still underway, but the new share class is anticipated to
be offered under the ticker TARZX and at a 90 basis point
management fee (similar to the other two classes today)
but cap non-management expenses at 15 basis points
without any sales loads, 12 b-1 fees, or sub-transfer agency
fees. Please contact Third Avenue?s shareholder services at
800-443-1021 if you have interest in learning more about
the share class as it is rolled out in March 2018.
As we said at the onset, not all years may be as rewarding
as 2017. However, by adhering to Third Avenue?s
time-tested strategy of investing in undervalued real estate
securities--while having an aligned portfolio management

Third Avenue Real Estate Value Fund | As of December 31, 2017

5
IMPORTANTINFORMATION
This publication does not constitute an offer or solicitation of any transaction in any securities. Any recommendation
contained herein may not be suitable for all investors. Information contained in this publication has been obtained from
sources we believe to be reliable, but cannot be guaranteed.
The information in this portfolio manager letter represents the opinions of the portfolio manager(s) and is not intended to
be a forecast of future events, a guarantee of future results or investment advice. Views expressed are those of the
portfolio manager(s) and may differ from those of other portfolio managers or of the firm as a whole. Also, please note that
any discussion of the Fund?s holdings, the Fund?s performance, and the portfolio manager(s) views are as of December 31,
2017 (except as otherwise stated), and are subject to change without notice. Certain information contained in this letter
constitutes ?forward-looking statements,?which can be identified by the use of forward-looking terminology such as ?may,?
?will,??should,??expect,??anticipate,??project,??estimate,??intend,??continue?or ?believe,?or the negatives thereof (such
as ?may not,??should not,??are not expected to,?etc.) or other variations thereon or comparable terminology. Due to
various risks and uncertainties, actual events or results or the actual performance of any fund may differ materially from
those reflected or contemplated in any such forward-looking statement.Current performance results may be lower or
higher than performance numbers quoted in certain letters to shareholders.
Date of first use of portfolio manager commentary: January 10, 2018
 ThirdAvenuereal estateVal ueFund
APPENDIX INSTITUTIONAL: TAREX | INVESTOR: TVRVX

December 31, 2017

FUNDPERFORMANCE TopTenhol dings

Allocations subject to change

Past performance is no guarantee of future results; returnsinclude reinvestment of all distributions. The above represents past
performance and current performance may be lower or higher than performance quoted above. Investment return and principal
value fluctuate so that an investor?sshares, when redeemed, may be worth more or lessthan the original cost. For the most recent
month-end performance, please visit the Fund?swebsite at www.thirdave.com. The grossexpense ratio for the fund?sinstitutional
and investor share classesis1.13%and 1.38%, respectively, asof March 1, 2017. Risksthat could negatively impact returnsinclude:
overbuilding and increased competition, increasesin property taxesand operating expenses, lack of financing, vacancies,
environmental contamination and itsrelated clean-up, changesin interest rates, casualty or condemnation losses, and variationsin
rental income.

Third Avenue Funds are offered by prospect us only. The prospect us cont ains import ant informat ion, including
invest ment object ives, risks, advisory fees and expenses. Please read t he prospect us carefully before invest ing in t he
Funds. Invest ment ret urn and principal value fluct uat e so t hat an invest or's shares, when redeemed, may be wort h more
or less t han t he original cost . For updat ed informat ion or a copy of our prospect us, please call 1-800-443-1021 or go t o
our web sit e at www.t hirdave.com. Dist ribut or of Third Avenue Funds: Foreside Fund Services, LLC.

Current performance results may be lower or higher than performance numbers quoted in certain letters to shareholders.

Third Avenue offers multiple investment solutions with unique exposures

and return profiles. Our core strategies are currently available through
?40Act mutual funds and customized accounts. If you would like further
information, please contact a Relationship Manager at:
w w w .thirdave.com 622 Third Avenue 212.906.1160
/third-ave-management New York, NY 10017 clientservice@thirdave.com