Real Estate Investment Trusts (REITs) offer a fairly straightforward and cost-effective way to gain exposure to real estate.
Typically, two different types of publicly-traded REITs exist. One is an equity REIT which is a company that invests primarily in income-generating real estate. The other is a mortgage REIT which will acquire mortgage-backed securities as well as provide mortgages and loans for real estate owners. Moreover, some companies may engage in a combination as a real estate investor and as a mortgage loan provider.
Interestingly, REITs are required by law to pay 90% of their taxable income back to their shareholders in the form of dividends. This explains why many different REITs provide a much larger dividend yield compared to other publicly traded companies.
Following are a few different REITs that have seen their share price fall over this past year. Consequently, they may offer investors an interesting buying opportunity in undervalued REITs.
Apartment Income REIT (AIRC)
Denver-based Apartment Income REIT (NYSE:AIRC) is a self-administered REIT that focuses on acquisition, development, and management of multi-family real estate. Their portfolio encompasses over 23,000 apartment homes throughout the U.S.
Over the past year, the company’s share price has fallen by 15%, with a fairly low P/E ratio compared to its peers. The most recent May 1 earnings report stated a total revenue increase of 17% but a net loss of $10 million in Q1 2023. This stands in contrast to a net income of $401 million the prior year.
Why? The company didn’t sell any real estate in the most recent quarter. Apartment Income REIT announced for Q1 of 2023 a dividend of $0.45 per share.
In January, the company announced the acquisition of a $298 million Southgate Towers, a luxury apartment complex in Miami Beach, Florida.
Public Storage (PSA)
Public Storage (NYSE:PSA) owns and operates self-storage facilities throughout 40 states and 266 facilities located in Western Europe. Over the past year, the company has seen a drop in share price by 7%. Trading with a P/E ratio stands at approximately 12.51.
In February of this year, Public Storage announced the proposal to acquire Life Storage (NYSE:LSI) in an all-stock transaction which includes all LSI outstanding shares and units owned.
Therefore, the PSA announced a 50% dividend payout to shareholders in February from $2.00 to $3.00 per share. Public Storage reported a 12% increase in total revenue for Q1 as well as earnings of $2.65 per share. Also, they acquired five new storage facilities and were in the process of acquiring 12 other facilities as of early May. On August 3, Public Storage is expected to release its Q2 earnings results.
Piedmont Office Realty Trust (PDM)
Piedmont Office Realty Trust (NYSE:PDM) is a self-managed real estate investment company that owns, operates, and manages high-end office properties within the U.S. Sunbelt markets. Their stock price has fallen by 0ver 40% in the last year due to recent financial instability. Piedmont has a P/E ratio of 11.07.
Alongside similar REITs, such as Boston Properties (NYSE:BXP) and Alexandria Real Estate Equities (NYSE:ARE), PDM has had setbacks. Financial hardships following the pandemic and the ever-increasing remote work movement led to unpopulated office spaces.
On May 1, PDM announced first quarter earnings in which they stated a revenue increase of 5% and a net loss of $1 million compared to prior year. In Q1, the company offered a dividend of $0.21 per share. The Q2 announcement is coming July 2.
On the date of publication, Noah Bolton 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.
