Diversify your holdings with REITs.
Real estate investment trusts provide diversification and income from their dividend yields and invest in shopping malls, apartments, office buildings, data centers and cell phone towers. A REIT trades in the same way as exchange traded funds or stocks. The number of alternative asset types such as data centers, cell towers, self-storage and prefabricated housing communities is now a significant part of the REIT industry and generates revenue in different strategies, says Michael Underhill , Director of Investments at Capital Innovations. Here are six unusual REITs to buy this year for your portfolio.
Brixmor Real Estate Group (ticker: BRX)
The multiple REITs of linear shopping malls have increased relative to the industry as a whole. Shopping centers have outperformed malls and will continue to grow, according to Underhill. Brixmor Property Group owns 421 shopping centers for a total of 73 million square feet of retail space which includes 5,000 national retailers such as Walmart (WMT), TJX Companies (TJX), Ross Stores (ROST) and Kroger Co . (KR). âWe believe Brixmor’s fundamentals are better on a relative basis compared to malls,â he says. âBRX has the opportunity to increase its exposure to fitness and restaurants, as well as participate in the rise in openings of key retailers, including Burlington, Ross, Ulta and TJ Maxx, with positive rental spreads. “
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties, a REIT that focuses on the regulated cannabis industry in the United States, has increased the company’s earnings per share by 135% in the past 12 months. The 95% share price rise did not keep pace with EPS growth. âIt appears that the market is no longer pricing innovative industrial properties like it used to be,â says Underhill. “We see this as an entry point opportunity for investors who were previously priced.” The average REIT generates low single-digit rent spreads when buying a property, while the company generates significantly better spreads and is expected to generate a premium with investors for the foreseeable future, he says.
Logistics real estate company, Prologis focuses on the industrial REIT market. This portion of REIT sector stock prices has been strong, but positive estimate revisions limited the relative expansion of multiples, Underhill says. On a market capitalization weighted average basis, the expansion of industrial REIT multiples over the past 12 months was 25%, similar to the REIT industry average of 23%. The company reported adjusted operating funds per share of 97 cents in the third quarter, beating analysts’ estimates for adjusted operating funds per share by 93 cents. Prologis declared a regular cash dividend for the quarter of 53 cents per common share of the company.
Iron Mountain (MRI)
Iron Mountain has 1,400 data storage facilities and has 225,000 customers. As the economy and consumers generate more data, the storage of information becomes more critical. âAlmost every aspect of our electronic life connects to the Internet and requires some degree of data storage,â says Daren Blonski, Managing Director of Sonoma Wealth Advisors. âBy owning REITs that own data centers and serve many large organizations that use data storage, you effectively own the space in which our data needs to be archived. Whatever the economic conditions, your mobile phone provider should always store your data.
American Tower Corp. (AMT)
American Tower is a multinational infrastructure REIT with 40,000 towers in the United States and 109,000 towers internationally. The global economy continues to connect through cell phones while traditional phone lines are mostly a relic of the past, says Blonski. âAs this trend continues, investing a portion of your portfolio in REITs that own cell phone towers could prove useful,â he says.
Hannon Armstrong Sustainable Infrastructure Capital (HASI)
One way to build additional diversification into your portfolio and offer a sustainable investing approach is to buy a sustainable infrastructure REIT like Hannon Armstrong, Blonski says. The assets include wind turbines, solar power and other energy efficiency assets. The company has more than $ 4.7 billion in assets is Hannon Armstrong and pays a dividend of 4.6%. Non-traditional REITs can generate additional income, but liquidity within them is still essential. âMake sure the investments you buy are liquid – that is, they give you the flexibility to get your money back when you want it,â he says.
Unusual REITs to buy now:
- Brixmor Real Estate Group (BRX)
- Innovative Industrial Properties (IIPR)
- Prologis (PLD)
- Iron Mountain (MRI)
- American Tower Corp. (AMT)
- Hannon Armstrong Sustainable Infrastructure Capital (HASI)
Corrected to October 28, 2019: A previous version of this story misspelled the Iron Mountain company name.