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Real estate investment trusts (REITs) are publicly traded companies that allow individual investors to buy shares in real estate portfolios that receive income from a variety of properties. They allow investors to easily invest in the real estate sector, which includes companies that own, develop, and manage residential, commercial, and industrial properties. A key REIT metric is funds from operations (FFO), a measure of earnings particular to the industry. Some big names within the sector 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 badly hurt by the COVID-19 pandemic and economic downturn, both due to layoffs and as many corporate employees have begun to work from home.
REITs, as represented by the Real Estate Select Sector SPDR ETF (XLRE), have dramatically underperformed the broader market. XLRE has provided a total return of 1.2% over the past 12 months, well below the Russell 1,000’s total return of 19.2%. The performance figures above and all statistics in the tables below are as of November 17.
Here are the top 3 REITs with the best value, the fastest growth, and the most momentum.
Best Value REITs
These are the REITs with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
Source: YCharts
- Brookfield Property REIT Inc.: Brookfield Property is a REIT that owns, develops, builds, manages, and leases various commercial properties. Among the company’s portfolio of properties are restaurants, malls, entertainment facilities, and parking areas. On November 6, the company announced a quarterly dividend of $0.3325 per share on its Class A Stock payable on December 31.
- Brandywine Realty Trust: Brandywine is a REIT that owns, manages, leases, acquires, and develops primarily suburban office properties. The company also owns an interest in and operates a commercial real estate management services company. For Q3 2020, Brandywine reported a 13.2% YOY decline in net revenue. The company posted net income of $274.4 million, aided by a $271.9 million one-time gain due to the sale of real estate from its joint venture of Commerce Square.
- Equity Commonwealth: Equity Commonwealth is a REIT that primarily invests in office buildings in major metropolitan markets throughout the U.S. The company also leases a significant number of properties to the U.S. government and medical industry clients.
Fastest Growing REITs
These are the REITs with the highest year-over-year (YOY) earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
Source: YCharts
- Brandywine Realty Trust: See above for company description.
- The Howard Hughes Corp.: The Howard Hughes Corp. is a real estate development company that manages shopping malls, mixed-use developments, and planned communities across the U.S.
- W.P. Carey Inc.: W.P. Carey Inc. is a net-lease REIT offering both build-to-suit financing solutions and sale-leaseback services. The company owns a portfolio of diversified real estate around the globe and manages non-traded REITs. It announced this month investments totaling $102 million in 27 supermarket properties in Spain as well as $85 million on 1.2 million square feet of industrial properties. The company’s year-to-date total investment volume was roughly $700 million at the time of these announcements.
REITs with the Most Momentum
These are the REITs that had the highest total return over the last 12 months.
Source: YCharts
- CoStar Group Inc.: CoStar provides information, analytics, and online marketplaces for commercial real estate. The company’s products include research and real-time data, a mobile and online real estate marketplace, comparative analytics for the hotel industry, and similar offerings. For Q3 2020, CoStar reported a 20.7% increase in net revenue gains and net income of $58 million. This period was also the third straight quarter in which the company experienced record levels of traffic on its platforms, with 69 million monthly unique visitors, a 33% increase YOY.
- Equinix Inc.: Equinix is a REIT that provides colocation space and related services. The company provides customers with access to a selection of business partners and solutions based on their colocation, interconnection, and managed IT service needs.
- Crown Castle International Corp.: Crown Castle International is a REIT that owns, operates, and leases wireless communications and infrastructure properties. The company manages a portfolio of properties in the U.S. and Australia. On November 16, Crown Castle announced that Dish Network Corp. (DISH) had signed a multi-year contract to lease space on up to 20,000 communication towers.
