Dear Fellow Shareholders,

We are pleased to provide you with the Third Avenue International Real Estate Value Fund (the “Fund”) report for the quarter ended December 31, 2025. The Fund delivered a +25.56%  return  (after  fees)  for  the  calendar  year, outperforming the MSCI ACWI ex USA IMI Core Real Estate Index1, which returned +21.42% over the same time period.

The Fund’s total return for the year was supported by the 13% share price appreciation for the holdings (in local currency), a 4% dividend yield on the underlying holdings, and an 8% tailwind from a weaker U.S. Dollar. At the same time, active capital recycling and strong earnings growth helped maintain the Fund’s forward price-to-earnings ratio at just 13 times, as well as a 30% discount to our conservative estimate of real estate value as measured by net asset value (“NAV”) for the holdings at year-end.

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ACTIVITY

At the start of 2025, Fund Management highlighted a growing disconnect between the earnings-compounding ability of the Fund’s holdings and the low multiples at which they were trading. In fact, we noted that, if this disconnect persisted, privatization activity at meaningful premiums could accelerate.

By year's end, this thesis materialized: three holdings entered privatization discussions, with two transactions confirmed. Given the Fund’s low earnings multiple and wide discounts to our conservative estimates of net asset value, we anticipate that elevated merger and privatization activity will continue in the year ahead.

The Fund’s top performer in 2025 was Mandarin Oriental, which returned +95%. Early in the fourth quarter, its largest shareholder, Jardine Matheson, offered to privatize the company at a 52% premium to its current share price. For context, Fund Management’s 2022 investment thesis anticipated this outcome. At the time, Mandarin was completing a US$2 billion office and retail development in Hong Kong, the value of which was expected to equal the company’s entire market cap and imply no value for the substantial  hotel  portfolio  and  management  platform. Alibaba’s subsequent agreement to acquire half of the asset triggered a complete privatization of the remaining shares. The transaction also highlights the significant value inherent in listed Asian real estate companies, in Fund Management’s opinion.

Two of the Fund’s self-storage holdings also entered privatization  negotiations  during  the  quarter.  Such developments align with Third Avenue’s long-held view that valuations in international self-storage remain unreasonably low, despite the scalability and structural growth of these platforms—many of which operate 10–20 years behind the more mature U.S. market.

Of note, National Storage (Australia) received a privatization offer from Brookfield Asset Management and the Government of Singapore Investment Corporation (“GIC”) at a 27% premium, consistent with our NAV estimate. The company exemplifies attributes common across many Fund holdings: irreplaceable assets in high-demand markets, inflation-resistant cash flows, a value-accretive operating platform, a straightforward capital structure, and strong alignment between management and minority shareholders. Yet like many investments across the Fund, its shares trade at a steep discount to intrinsic value prior to the privatization effort, resulting in a sharp uplift alongside the agreement.

On the other hand, Blackstone’s discussions with Big Yellow in the U.K. did not result in a transaction; however, we believe that any future privatization would likely require a premium of  ~35% above the current share price. The founders—who collectively own more than £100 million of shares—appear open to a sale at the right valuation.

During the quarter, Fund Management took advantage of share price volatility to increase exposure to two existing Fund positions. First, Australian diversified developer and asset manager Lendlease Corporation Ltd. (“Lendlease”), which continues to trade at around half of our assessment of its NAV despite making significant progress on asset sales, business simplification, and the expansion of its high-quality Australian project pipeline in a capital-efficient manner. Sometime this year, Lendlease is likely to sell enough assets and reduce leverage sufficiently to commence a highly accretive share buyback, which should act as a share price catalyst. Second, the Fund’s position in German and Polish residential owner and developer TAG Immobilien (“TAG”). Underpinned by a portfolio of over 83,000 resilient German rental units, TAG continues to expand into the higher-growth Polish residential market, where favorable market conditions exist. Despite now accounting for almost half of TAG’s earnings,  the  Polish  exposure  remains  significantly underappreciated at the current share price. Ongoing favorable fundamentals should act as a catalyst for TAG shares over time.

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POSITIONING

Including the above referenced activity, the allocations for the Third Avenue International Real Estate Value Fund remain broadly consistent with recent quarters. That is to say, the Fund’s exposure continues to emphasize investments in (i) deep  value  and  special  situations,  (ii)  undersupplied residential markets, (iii) self-storage platforms with long runways for growth, (iv) mid-cap companies with specialized, non-traditional  real  estate  assets,  and  (v)  diversified geographic exposure as highlighted in the following charts.

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OUTLOOK COMMENTARY

Despite  a  strong  2025,  Fund  Management  remains constructive about 2026. Valuation remains a key advantage, in our view, with the price-to-earnings ratio for the Fund’s holdings at 13 times (in the aggregate) when compared to 22 times for the S&P 500—the widest relative discount in a decade, as shown below.

The Fund’s low multiple is particularly compelling given its earnings growth potential. Not only that, but the Fund’s holdings also trade at a meaningful discount to the U.S. REIT sector despite expectations for higher earnings growth in the year ahead.

With that being the case, it seems probable that several macro factors could support multiple expansion, including (i) a regime shift in global capital flows toward international markets and tangible assets, (ii) continued U.S. Dollar weakness, which directly benefits Fund returns and improves liquidity (and the cost of capital) internationally, and (iii) potential interest rate cuts, which have historically supported real estate valuations and led to fund flows into listed property securities.

Even if valuation discounts persist and multiples remain stable, the setup of NAV growth, earnings expansion, and robust earnings yield can generate attractive total returns, in Fund Management’s view, with an earnings yield of close to 8% and the potential for high single-digit earnings growth. In this regard, the Fund’s underlying investments target those select-pockets with idiosyncratic drivers of value from ongoing operations, including (i) improving fundamentals in Hong Kong, where rising capital formation is supporting residential, retail, and office markets, (ii) severely undersupplied housing markets in Sydney, Dublin, Melbourne, and Poland, which should see rising rents, home prices, and transaction volumes, (iii) self-storage demand growth, supported by rising housing activity and normalizing expense trends, and (iv) industrial strength in Mexico, Central and Eastern Europe, Thailand, and Vietnam, driven by supply chain diversification away from concentrated Chinese manufacturing.

Furthermore, the Fund’s investments often involve significant ‘resource conversion’ opportunities, where a company creates value not through its ongoing operations but by restructuring assets, liabilities, or ownership to unlock hidden or latent value. These investments include (i) several Asia-Pacific companies focused on strategic initiatives like selling non-core assets, simplifying operations, and using proceeds to buy back shares at discounts, (ii) firms completing large development pipelines, such as datacenter projects in Spain and Hong Kong, that will notably boost cash flow, and (iii) exposure to Japanese property firms that actively enhance value and trade assets to realize their worth.

Ultimately, resource conversion may involve fully privatizing a real estate company, as seen this quarter with Mandarin and National Storage. Fund Management maintains the view that if the public markets do not recognize the value of listed real estate internationally through increased share prices, the private markets will do so through privatization at significant premiums.

With a compelling combination of sector-level tailwinds and company-specific catalysts, Fund Management remains highly optimistic about the Fund’s future. We also deeply appreciate your continued trust and support. Please reach out at realestate@thirdave.com with any questions, comments, or ideas. Otherwise, we look forward to updating you again next quarter.

Sincerely, The Third Avenue Real Estate Value Team

Quentin Velleley, CFA Portfolio Manager