The novel coronavirus pandemic made 2020 a challenging year for real estate investment trusts (REITs). With incomes down and wide-ranging unemployment, the real estate industry was bound to suffer.
Shutdowns and work-from-home mandates meant retail and office REITs suffered the most during this crisis. Some specialty REITs from the industrial and self-storage industries managed to eke out the period somewhat in better shape.
However, when it came down to it, the real estate sector suffered a 2% loss last year. Now that we are on the path to recovery, many analysts and investors are hoping the tough times are over. And if the red hot housing industry is any indicator, there is cause for hope.
The markets certainly think so and have been rewarding REITs handsomely in the last few months. Nevertheless, buying opportunities still exist within the sector, especially with vaccines signaling the eventual end of the pandemic.
- American Tower (NYSE:AMT)
- Americold Realty Trust (NYSE:COLD)
- Innovative Industrial Properties (NYSE:IIPR)
- Digital Realty (NYSE:DLR)
- STAG Industrial (NYSE:STAG)
REITs To Buy: American Tower (AMT)
American Tower owns a global portfolio of 181,000 cell towers throughout the U.S., Asia, Latin America, Europe, and the Middle East.
It leases space on its towers to wireless service providers and can easily profit by expanding the number of tenants per tower. Data usage and mobile device penetration are growing exponentially every year. So, it is all systems go for AMT.
AMT has also been aggressive when it comes to mergers and acquisitions (M&A). The REIT has closed its acquisition of InSite Wireless Group, which owns 3,000 communication sites across the U.S. and Canada, in a $3.5 billion deal that is immediately accretive to funds from operations (FFO). The deal marks the company’s expansion into the Canadian market.
Its Telxius Towers acquisition meanwhile is something that will make it the second-largest independent communications infrastructure provider in Europe. So we have two territories in which the company has expanded greatly in the last year. This aggressive strategy is why it is one of my favorite REITs.
Americold Realty Trust (COLD)
Americold Realty Trust benefitted substantially from the pandemic since it is an is an essential link in the farm-to-table supply chain.
The publicly traded REIT owns 185 cold-storage warehouses spanning 1.1 billion cubic feet of storage space across the U.S., Canada, South America, and Australia.
The REIT is also aggressively expanding by taking over privately owned Agro Merchants Group, the world’s fourth-largest temperature-controlled warehouse business, in an FFO-accretive deal worth $1.74 billion.
Despite the pandemic, EPS and sales are up 39.8% and 14.1% on a trailing 12 months (TTM). Analysts believe sales and EPS will grow 14.1% and 22.0%, respectively, next year. So, the momentum shows no signs of stopping anytime soon.
During last year, despite the pandemic, the REIT was able to greatly expand its presence in the Northeast by acquiring eight cold-storage warehouses from a competitor and invested $84 million in its Arkansas facility serving ConAgra brands.
REITs To Buy: Innovative Industrial Properties (IIPR)
IIPR is a name that sticks out among REITs purely because it serves a very unique niche: cannabis. Innovative Industrial Properties is the solitary NYSE-listed REIT specializing in medical-use cannabis growers, making it very attractive to investors since medical cannabis is a $12.4 billion industry that will jump to $34 billion by 2025.
However, despite all these positive aspects, IIPR is actually down 4.0% in the last three months. A major factor in this regard is disappointment.
Many expected Democrats to have much more of an impact on marijuana legalization, but investors and marijuana enthusiasts have been disappointed so far under this administration. Regardless, the year is shaping up to be a good one for IIPR with new tenants and properties driving future growth.
Performance is excellent across the board. Adjusted FFO shot up 79% in the last year and the dividend increased approximately 60%.
Analysts forecast 2021 and 2022 revenue to increase 66.7% and 131.8%, respectively, per Refinitiv data. Considering the outsized revenue growth projected, you can pretty much guarantee the IIPR dividend will continue to increase at an exponential rate moving forward.
Digital Realty (DLR)
Digital Realty Trust operates and manages data centers. Due to the nature of its business model, the REIT manages to serve several niches including IT, communications, manufacturing, healthcare, and financial services.
It should come as no surprise that this REIT is one of the largest U.S.-based ones. And it is on its way to becoming a dividend aristocrat due to its streak of hiking its dividend consecutively for a 15-year period.
The company has more “than 284 facilities in 48 metros across 23 countries on six continents.” So you are getting a lot of geographic diversification if you are buying this stock.
Shares are up 23.7% in the last three months. However, considering the high growth industry in which DLR operates, the long-term trajectory is up for this one.
REITs To Buy: STAG Industrial (STAG)
If you want to take a bet on the broader economic recovery, STAG Industrial is right up your alley. The REIT invests in warehouses across the country and has benefitted greatly from e-commerce trends.
However, now that the economy is opening up and consumer discretionary incomes are on the rise once again, the same-store net operating income (NOI) growth will increase at a very healthy clip.
The largest tenant of the REIT is Amazon.com (NASDAQ:AMZN), and approximately 40% of its portfolio is dedicated to e-commerce activity.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.