Real estate stocks have been substantially lagging the broader U.S. equity market. As a result, many real estate stocks are trading at attractive levels. In addition, the average dividend for real estate firms is higher than the rest of the stocks that Morningstar analysts cover.
Today we’re looking at three real estate stocks our analysts like.
Simon Property Group has sold off significantly over the past few months as fears of the coronavirus impact on brick-and-mortar retail sales grew among investors. Simon has long-term leases with tenants, so it should continue to receive rent even during the current crisis. While many weaker retailers may go bankrupt due to the lack of sales, we think Simon’s attractive portfolio will be able to quickly fill any vacancies. Additionally, Simon recently acquired Class A mall competitor Taubman Centers, which should increase cash flows and provide more leverage when negotiating with tenants.
The portfolio of Regency Centers is filled with high-quality assets in population-dense, affluent markets. The company focuses on owning grocery-anchored centers, with more than 80% of its properties featuring a grocery anchor, and grocery stores representing slightly more than 20% of annual base rent. Regency’s grocery anchors are strong draws to the centers, as they produce sales per square foot well above the national average and are very healthy with low occupancy costs. Grocery has been one of the retail categories that has seen sales growth increases during the pandemic, driving consistent business to the rest of Regency’s portfolio, which should maintain high occupancies.
Ventas owns high-quality assets in the senior housing, medical office, and life science fields. While the company’s medical office and life science portfolios should be relatively unaffected by the coronavirus outbreak, the senior housing portfolio is likely to experience a very significant impact to occupancies, as the virus has the highest lethality rate among senior citizens. However, while the virus will likely continue to negatively affect net operating income for the industry in 2021, we think the industry should see strong long-term growth from the coming demographic wave of baby boomers aging into senior housing facilities.
Analyst Kevin Brown provided the research behind this segment.