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 invest easily 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 Inc. (CCI), and Prologis, Inc (PLD).
The COVID-19 pandemic has significantly disrupted the commercial real estate industry, as workers around the world have adapted to working from home and various lockdown measures have been enacted. Despite the economy’s recovery, the real estate industry’s recovery has been uneven. Some companies are moving to new commercial office locations, others are repurposing existing spaces, and others are redesigning their existing space. Spurred by interest rates hikes imposed by the Federal Reserve, some analysts predicted that the residential housing market may see a correction or even a crash.
REITs, as represented by an exchange-traded fund (ETF)—the Real Estate Select Sector SPDR Fund (XLRE)—have outperformed the broader market. XLRE’s 0.0% total return over the past 12 months bested the benchmark Russell 1000 index, which has provided a total return of -5.5%. These market performance numbers and the statistics in the tables below are as of Aug. 10, 2022.
Here are the top three REITs with the best value, fastest growth, and 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 that you’re paying less for each dollar of profit generated.
Source: YCharts
- Annaly Capital Management Inc.: Annaly Capital invests in real estate and related assets, including agency mortgage-backed securities (MBS), residential and commercial real estate, and middle-market lending.
- Rithm Capital Corp.: Rithm Capital, formerly known as New Residential Investment Corp., is a public REIT investing in the residential housing sector. The company’s portfolio includes mortgage-servicing-related assets, residential loans, non-agency securities, and similar investments. The company first announced the name and stock ticker change, as well as an internalization of management, in June 2022.
- Apartment Income REIT Corp.: Apartment Income REIT, known as AIR Communities, is a self-managed REIT investing in multi-family real estate across the U.S. The company owns properties that it manages as well as properties that it expects to sell or lease to a third party. On July 27, AIR Communities announced a quarterly dividend of $0.45 per Class A common share for Q2 2022. The dividend is payable Aug. 30 to shareholders as of Aug. 19, 2022.
These are the top REITs 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 figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
Source: YCharts
- Realty Income Corp.: Realty Income is a REIT that owns and manages commercial properties across the U.S. and Europe. The company seeks investments with the goal of delivering dependable monthly dividends. Realty Income reported Q2 2022 results on Aug. 3. Net income available to common stockholders surged by 79.3% YOY as revenue grew by a similar margin. The company’s growth reflects its Nov. 2022 merger with VEREIT Inc.
- The Howard Hughes Corp.: The Howard Hughes Corp. is a REIT that owns, manages and develops commercial, residential and mixed-use real estate across the U.S. It focuses on master planned communities in New York, Maryland, Texas, Nevada, and elsewhere.
- Rexford Industrial Realty Inc.: Rexford Industrial Realty is a REIT that owns, operates, and develops industrial properties in Southern California. It owns 335 properties with nearly 41 million rentable square feet. Rexford reported on July 20 Q2 2022 earnings results. Net income climbed by 57.1% on strong revenue growth YOY. During the quarter, the company executed 36 new leases, more than half of the number of renewal leases for the quarter.
These are the REITs that had the highest total return over the past 12 months.
Source: YCharts
- Duke Realty Corp.: Duke Realty is a self-managed REIT that owns, manages, and develops industrial real estate. It also provides services related to construction management and development. On June 13, the company reported that it would be acquired by logistics real estate company Prologis in an all-stock transaction worth roughly $26 billion. Prologis plans to retain 94% of Duke’s assets. The transaction is expected to close in Q4 2022.
- Iron Mountain Inc.: Iron Mountain focuses on information management and storage. It provides data center, secure record storage, art storage, and similar offerings.
- VICI Properties Inc.: VICI Properties is a REIT that owns gaming, hospitality, and entertainment properties. Its properties include Caesars Palace Las Vegas, MGM Grand, and the Venetian Resort Las Vegas. On July 14, the company announced that it had agreed to provide a mezzanine loan of up to $59 million to Great Wolf Resorts Inc. The loan is related to the development of Great Wolf Lodge South Florida, a 500-room indoor water park resort slated to open to guests in summer 2024.
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