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).
The COVID-19 pandemic has significantly disrupted the commercial real estate industry, as workers around the world adapted to working from home and various lockdown measures have been enacted. Despite the economy’s rebound, the industry’s recovery has been uneven. Some analysts predict a speedy recovery to pre-pandemic levels.
REITs, as represented by an exchange-traded fund (ETF)—the Real Estate Select Sector SPDR Fund (XLRE)—have narrowly outperformed the broader market. XLRE’s 42.2% total return over the past 12 months exceeded the benchmark iShares Russell 1000 ETF (IWB), which has provided a total return of 36.5%. These market performance numbers and the statistics in the tables below are as of Oct. 27, 2021.
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 you’re paying less for each dollar of profit generated.
|Best Value REITs|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E Ratio|
|Annaly Capital Management Inc. (NLY)||8.69||12.6||3.8|
|AGNC Investment Corp. (AGNC)||16.51||8.7||4.8|
|SL Green Realty Corp. (SLG)||73.07||4.9||7.6|
- Annaly Capital Management Inc.: Annaly Capital Management invests in real estate and related assets, including agency mortgage-backed securities (MBS), residential and commercial real estate, and middle-market lending.
- AGNC Investment Corp.: AGNC Investment invests mainly in residential MBS on a leveraged basis through collateralized borrowings. It uses an active portfolio management strategy to provide risk-adjusted returns.
- SL Green Realty Corp.: SL Green Realty invests in office properties in the New York metropolitan area. On Oct. 21, the company declared a monthly ordinary dividend of $0.30 per share payable Nov. 15 to shareholders of record as of Oct. 29, 2021.
These are the top REITs as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.
|Fastest Growing REITs|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Weyerhaeuser Co. (WY)||36.76||27.6||1,270||92.8|
|Jones Lang LaSalle Inc. (JLL)||263.43||13.4||1,220||22.5|
|Sun Communities Inc. (SUI)||197.94||23.0||60.7||100.0|
- Weyerhaeuser Co.: Weyerhaeuser is a forest products company that grows and harvests trees and develops real estate. The company also provides construction services and forest products. On Oct. 29, 2021 the company reported $0.64 in EPS on $2.3 billion in revenue. These are up from $0.38 in EPS on $2.1 billion in revenue a year earlier.
- Jones Lang LaSalle Inc.: Jones Lang LaSalle is a real estate and investment management service provider. The company provides services such as tenant representation, property management, leasing, finance, and valuation services to a variety of corporate and institutional clients globally. On Oct. 21, 2021 the company announced the acquisition of Building Engines, a Boston-based property management platform, for approximately $300 million.
- Sun Communities Inc.: Sun Communities owns and operates manufactured-housing communities, recreational vehicle resorts, and marinas. The company owns properties throughout the Midwest and the Southeast regions of the United States, as well as Canada.
These are the REITs that had the highest total return over the last 12 months.
|REITs with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Jones Lang LaSalle Inc. (JLL)||263.43||13.4||138.5|
|Simon Property Group Inc. (SPG)||146.37||48.1||137.6|
|CBRE Group Inc. (CBRE)||104.59||35.1||129.5|
|iShares Russell 1000 ETF (IWB)||N/A||N/A||36.5|
|Real Estate Select Sector SPDR Fund (XLRE)||N/A||N/A||42.2|
- Jones Lang LaSalle Inc.: See above for company description.
- Simon Property Group Inc.: Simon Property Group is a REIT that owns, develops, and manages malls, outlet centers, community centers, and other related properties across North America, Europe, and Asia.
- CBRE Group Inc.: CBRE Group is a real estate service provider. The company offers valuation, advisory, real estate investment, and property management services. It focuses on offices, hotels, gaming properties, multifamily residences, and data centers. In September, the company announced it was the top-ranked firm for commercial real estate investment sales globally in the first half of 2021, according to Real Capital Analytics. CBRE Group had a 23.7% market share across all property types on a worldwide basis during that period, nearly twice as big as the two next biggest rivals, according to RCA.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
Get more stuff like this
Subscribe to our mailing list and get interesting stuff and updates to your email inbox.
Thank you for subscribing.
Something went wrong.