Top REITs for April 2021

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. Among other requirements, REITs are required to pay out at least 90% of their taxable income as dividends. 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 many corporate employees working from home. However, the U.S. government’s $1.9 trillion stimulus package, recently passed by Congress, could fuel a rapid economic recovery, and along with it, a rebound in commercial real estate.

REITs, as represented by the Real Estate Select Sector SPDR ETF (XLRE), have significantly underperformed the broader market. XLRE’s 33% total return over the past 12 months is well below the Russell 1000’s 57.7%, as of March 26. All statistics in the tables below are also as of March 26.

Here are the top 3 REITs with the best value, the fastest growth, and the most momentum.

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

• Brandywine Realty Trust: Brandywine Realty Trust is a REIT that owns, leases, develops, and manages primarily office properties. These are mostly located in the Philadelphia, Austin, and Washington D.C. markets, It also has an ownership interest and operates a commercial real estate management services company. The company reported a 13.8% year-over-year (YOY) decline in revenue in Q4 2020. However, net income rose 13.1%, boosted by a net gain on the disposition of certain real estate assets.
• Equity Commonwealth: Equity Commonwealth is a REIT that owns office buildings. Over the last several years, it has divested 164 properties, leaving four. Earlier in the month, the company announced that Chief Financial Officer Adam Markman resigned, and appointed Bill Griffiths, SVP of Capital Markets since 2014, to take his place.
• Kimco Realty Corp.: Kimco is a REIT that owns and operates open-air shopping centers throughout the U.S. and Puerto Rico. Its properties are usually anchored by a supermarket and big box store selling consumer staples products. The company reported a 9% YOY decline in revenue in Q4 2020. But net income increased by 83.4%, boosted by a significant net gain on marketable securities.

These are the top REIT stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Source: YCharts

• VICI Properties Inc.: VICI Properties is a REIT that owns gaming, hospitality, and entertainment destinations. Its portfolio includes several dozen gaming facilities. It also owns four championship golf courses, 34 acres of undeveloped land adjacent to the Las Vegas Strip, and has an investment in Chelsea Piers in New York City. In early March, VICI Properties announced it agreed to buy the Venetian Resort property in Las Vegas from Las Vegas Sands Corp. (LVS) for $4 billion. Apollo Global Management, which bought the resort operating company for $2.3 billion, inked a 30-year lease that pays VICI Properties $250 million in rent annually.
• Ventas Inc.: Ventas is a REIT focused on senior housing, healthcare properties, and other properties that are located in the U.S., Canada, and the United Kingdom. Its Q4 2020 net income attributable to common shareholders was $110.5 million, about 10 times the year-ago figure despite revenue falling by 7.5%. Several items helped Ventas’ profitability, including gains from the sale of real estate.
• SL Green Realty Corp.: SL Green Realty is a REIT primarily focused on acquiring and managing commercial properties in Manhattan. The company reported a 23.8% YOY decline in revenue in Q4 2020. However, net income attributable to common shareholders was ten times last year’s figure, boosted by a net gain on the sale of real estate assets as well as fair value adjustments.

These are the REITs that had the highest total return over the last 12 months.

Source: YCharts

• Park Hotels & Resorts Inc.: Park Hotels & Resorts is a lodging REIT whose portfolio spans 60 premium-branded hotels that are primarily located in the U.S. Originally part of Hilton Worldwide Holdings Inc. (HLT), the parent company spun off the entity into an independent, publicly traded company in January 2017.
• Starwood Property Trust Inc.: Starwood Property Trust originates, acquires, finances, and manages mortgage loans backed by a range of commercial and residential property types in the U.S. and Europe. There is also an infrastructure lending business, and It has other real estate investments.
• Brookfield Property REIT Inc.: Brookfield Property REIT is a subsidiary of the publicly traded Brookfield Property Partners L.P. (BPY). It owns the parent company’s core retail portfolio. Formed as a REIT, the shares are designed to provide the same economic return as the parent.

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