Real estate investment trusts (REITs) are publicly traded companies that allow individual investors to purchase shares in real estate portfolios that receive income from various properties. They enable investors to easily invest in the real estate industry, including companies that own, develop and manage residential, commercial and industrial properties. REITs are required, among other things, to pay out at least 90% of their taxable income as dividends. An important REIT metric is funds from operations (FFO), a measure of revenue specific to the industry. Some of the big names in the industry include American Tower Corp. (AMT), Crown Castle International Corp. (CCI) and Prologis Inc. (PLD).
Many commercial real estate companies that own office buildings and retail space have been hit hard by the COVID-19 pandemic and the economic downturn, both from layoffs and many work-from-home workers. However, the US government’s $1.9 trillion stimulus package, approved by Congress in March 2021, is ensuring a rapid economic recovery. Commercial real estate sales volumes are beginning to recover to their pre-pandemic levels, with many investors believing the worst of the coronavirus crisis is over. However, risks remain as the more communicable Delta variant of the virus continues to spread.
REITs, as represented by the Real Estate Select Sector SPDR ETF (XLRE), underperformed the broader market. XLRE’s total return of 36.2% over the past 12 months is below the Russell 1000 index, which has delivered a total return of 40.1%. These market performance figures and the statistics in the tables below are as of July 26, 2021.
Here are the top 3 REITs with the best value, fastest growth, and most momentum.
These are the REITs with the lowest price-to-earnings ratio over 12 months. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you are paying less for every dollar of profit generated.
|Best Value REITs|
|Price ($)||Market Capitalization ($B)||12 month ongoing P/E ratio|
|Annaly Capital Management Inc. (NLY)||8.47||11.9||2.7|
|AGNC Investment Corp. (AGNC)||16.18||8.5||2.9|
|Kimco Real Estate Corp. (KIM)||20.82||9.0||8.8|
- Annaly Capital Management Inc.: Annaly Capital Management invests in real estate and related assets, including mortgage-backed securities (MBS), residential and commercial real estate, and mid-market lending.
- AGNC Investment Corp.: AGNC Investment invests primarily in residential MBS on a leveraged basis through collateralised loans. It uses an active portfolio management strategy to provide risk-adjusted returns. The company recently announced financial results for the second quarter of fiscal year 2021 (FY), the three-month period ended June 30, 2021. It reported a net loss of $411 million, a significant deterioration from net income. from the previous quarter of $718. million. AGNC Investment’s net interest income declined 21.4% year-on-year (YOY). It also reported a “totally other” loss of $621 million on its investments compared to a “total other” gain of $447 million in the same quarter a year ago.
- Kimco Realty Corp.: Kimco Realty owns and operates outdoor malls, anchored malls and mixed-use assets. The asset portfolio is mainly concentrated in the outskirts of the first ring of the main metropolitan markets.
These are the top REITs, ranked by a growth model that rates companies based on a 50/50 weighting of their most recent quarter-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings per share (EPS). ) grow. Both sales and profits are critical factors for a company’s success. Therefore, ranking companies by only one growth metric makes a ranking susceptible to that quarter’s accounting anomalies (such as changes in tax laws or restructuring costs) that may prevent one figure or the other from being representative of the company in general. Companies with quarterly earnings per share or revenue growth of more than 2500% were excluded as outliers.
|Fastest Growing REITs|
|Price ($)||Market Capitalization ($B)||EPS growth (%)||Revenue growth (%)|
|Jones Lang LaSalle Inc. (JLL)||209.19||10.7||1870||-1.4|
|Weyerhaeuser Co. (YOU)||34.66||26.0||355.0||45.0|
|Kilroy Realty Corp. (KRC)||68.99||8.0||1.050||6.5|
- Jones Lang LaSalle Inc.: Jones Lang LaSalle is a real estate and investment management services company. The company provides services such as tenant representation, property management, leasing, finance and valuation services to a variety of corporate and institutional clients worldwide. Jones Lang LaSalle announced the appointment of Kylie Kendrick as Chief Operating Officer (COO) in early June. She was previously managing director, global head of Wholesale Banking Operations at HSBC in London.
- Weyerhaeuser Co.: Weyerhaeuser is a forest products company that grows trees, harvests and develops real estate. The company also provides construction services and forest products.
- Kilroy Realty Corp.: Kilroy Realty is a REIT that owns, develops, acquires and operates Class A office properties throughout the US. The company announced in mid-June that it agreed to purchase three separate properties for a total consideration of approximately $670 million, including: Indeed Tower in Austin, Texas; a site adjacent to the San Diego development project; and the leasehold under the Key Center office tower in Bellevue, Washington. All three transactions are expected to close by the end of the third quarter.
These are the REITs with the highest total return over the past 12 months.
|REITs with the Most Momentum|
|Price ($)||Market Capitalization ($B)||12 months sequential total return (%)|
|Park Hotels & Resorts Inc. (HP)||19.10||4.5||123.9|
|Simon Property Group Inc. (SPG)||127.03||41.7||121.7|
|Jones Lang LaSalle Inc. (JLL)||209.19||10.7||109.1|
|Real Estate Select Sector SPDR ETF (XLRE)||N/A||N/A||36.2|
- Park Hotels & Resorts Inc.: Park Hotels & Resorts is a REIT that owns and operates hotels and resorts. The properties offer services and amenities such as lodging, restaurants, meeting and wedding rooms, spas and fitness centers.
- Simon Property Group Inc.: Simon Property Group is a REIT that owns, develops and manages shopping malls, outlet centers, community centers and other related properties. The company announced in June a 7.7% increase in its ordinary stock dividend for the second quarter of 2021, which is scheduled to be paid on July 23, 2021.
- Jones Lang LaSalle Inc.: See above for company description.
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