Cars drive past the MGM Resorts International Grand Hotel & Casino in Las Vegas. (Photo by: Jacob Kepler/Bloomberg)
BLOOMBERG NEWS
Many REITs focus on residential and office properties. But the sector offers opportunities to invest in numerous specialized markets. Several leading investment experts and contributors to MoneyShow.com highlight their favorite REITs involved in such niche markets as casinos to self-storage facilities and convenience stores to data centers.
Brit Ryle, The Wealth Advisory
A few years ago, the casino chain MGM Resorts International (MGM) was in a sticky situation. It had expanded very quickly and had a ton of debt on its balance sheet.
Meanwhile, the company was a casino operator, not a property manager. So, they decided to spin most of the properties off into a REIT and then rent them back. That REIT is MGM Growth Properties LLC (MGP).
In just three years, the company went from conception to being the biggest landlord in Las Vegas. The company owns The Mirage, Mandalay Bay, Luxor Las Vegas, New York-New York Hotel & Casino, Monte Carlo Resort & Casino, Excalibur Resort & Casino, The Park, Gold Strike Tunica, MGM Grand Detroit, and Beau Rivage from MGM Resorts International.
And it’s bringing in some nice (and growing) rent checks for investors. You see, casinos generate a ton of revenue every year. And to rent the space they occupy, they pay hundreds of millions.
And with MGM and MGP so closely connected, you can bet MGP is going to be picking up the rest of the MGM property portfolio as time goes on. It’s already got eyes on The Aria and Vdara in Las Vegas. And Circus Circus should be coming soon.
Then there are three other MGM properties in Vegas that all generate massive amounts of cash —The Bellagio, the MGM Grand, and The Signature. And MGM has a joint venture with AEG at the T-Mobile Arena — also known as the MGM Grand Garden Arena.
MoneyShow.com: Get the 10 Best REITs to Buy for 2019 Here
But that’s just Las Vegas. MGM Resorts currently has two properties in Macau run by its Chinese wing, MGM China Holdings. The MGM Macau is a luxury casino in the heart of Macau’s gambling action. And the MGM Cotai is the crown jewel in the MGM crown.
Plus, MGM Resorts has already applied for one of three gaming permits to be issued in Japan. If it’s one of the winners, you can bet there’ll be another multi-billion-dollar luxury resort coming soon.
This company is way undervalued. It pretty much owns the Las Vegas Strip. It’s got two of the premier properties in Macau. It owns some of the most profitable regional casinos in the U.S, and it’s likely to expand into Japan soon.
Plus, it pays a juicy dividend yield, and it’s hiked that payment six times over 11 quarters — four of those coming just last year. But it’s trading at a massive discount to its real value. It’s not even trading at the total value of its physical assets. That’s not going to last.
Eddy Elfenbein, Growth Stock Advisor
We now live in a low-rate world. The good news is that for income investors, there are plenty of low-risk ways to profit. Here are two real estate investment trusts, or REITs, that aren’t your garden-variety REIT. Both are ready to ride long-term growth trends.
The first is Americold Realty Trust (COLD), the largest REIT that’s focused on owning and running temperature-controlled warehouses. Why is that important? Well, these warehouse are vital to the food industry.
The REIT owns and operates 156 such warehouses with approximately 928 million refrigerated cubic feet of storage. They now serve more than 2,400 customers worldwide.
Don’t be fooled. The food industry is hardly a no-growth area. A lot more of these warehouses will be needed, and soon. With millennials embracing online grocery shopping, demand for cold storage facilities is rising.
Americold isn’t just a landlord. The firm also provides services that help their customers properly move their products around the supply chain. This is potentially a huge market that’s barely been tapped.
American Tower (AMT) is in the cell phone tower business. Tower companies lease the space on their structures to several tenants like wireless carriers and government agencies.
This business has a strong growth component, thanks largely to the coming of 5G wireless networks. These faster, more powerful networks are an absolute necessity for our interconnected world.
This new tech also includes things like ultra-HD video, augmented reality and connected self-driving cars. And they all consume huge amounts of data, and that means towers.
American Tower has over 170,000 tower sites. It generates more than half its total revenue here in the U.S., with its customers being all the major wireless carriers.
Another big plus I see for American Tower is its vast overseas footprint. For example, the REIT has its largest international exposure in India where data usage has been growing 100% per year.
Latin America has a lot of potential too. There are over 200 million people in the middle class in Latin America. American Tower is a REIT very well positioned to ride the trend of a more interconnected world! The REIT currently yields about 2.6%.
MoneyShow.com: Get the 10 Best REITs to Buy for 2019 Here
Jim Powell, Global Changes & Opportunities
Most American families have too much stuff. (I must count myself among the guilty.) When the volume of one’s possessions exceeds the storage capacity of a home, many people rent an outside unit for the overflow.
The alternative is to sell what isn’t being used or needed — but that’s too terrible to contemplate. Storage units are also very popular with businesses. It is usually less expensive to rent a storage space then to expand an office to hold inventory.
There are even greater savings for businesses that have seasonal items that sell out. When that happens, the storage unit can be cancelled and the rental fee put to better use.
For both individuals and businesses, the arrival of difficult economic times can also make it necessary to downsize and put possessions and inventory in outside storage units. Natural disasters also greatly increase the need for storage units to hold furniture and other possessions until victims can rebuild or relocate.
Extra Space Storage (EXR) is a REIT that operates 1,650 self-storage stores – with a total of 1.2 million units — in 39 states, Washington, DC, and Puerto Rico.
In addition to storage units, the company offers inside and outside boat and RV storage. For businesses with large storage needs, the company has oversized units that function as small warehouses.
The company has an additional business providing insurance for the goods it stores. Extra pace Storage is the second largest operator of self-storage businesses in the US. The current dividend yield is an attractive 3.37%.
Mike Larson, Safe Money Report
Getty Realty Corp. (GTY) is a Jericho, New York-based REIT that owns, leases, and finances gas station and convenience store properties. The company has more than 930 of them in its portfolio spread across 30 states. They include locations under all the major gasoline brand names, including ExxonMobil , Conoco, Citgo and Sunoco .
Getty makes an attractive investment in an economy that’s likely to slow. That’s because its business isn’t as cyclical as other subsectors in the commercial real estate space, like office and industrial. We all need to gas up our cars and SUVs … or grab a soda and a quick bite to eat … regardless of how the economy is doing.
The company has been growing both organically and through acquisitions over the past several years. It spent $537 million adding 238 properties between 2014 and 2018, while also committing capital to the redevelopment of older stations and stores.
Most of its properties — around 75% — now have both gas pumps and a convenience store, while 10% include a fast food restaurant like Wendy’s, McDonald’s or Dunkin’. This increases site revenue and profit opportunities.
Its quarterly dividend has also increased at an annual rate of 9.5% over the last half-decade. It now pays 35 cents per share, which is good for a yield of around 4.3%. The stock recently pulled back to technical support in the low-$30s. They appear to be basing here ahead of a fresh run higher. Take advantage to buy Getty Realty at market.
Cloud computing is a truly powerful secular trend. The market is expected to reach $441 billion in size by 2020, according to Gartner .
The firm predicts that by 2021, 28% of all IT spending will be for cloud-based infrastructure, middleware, application and business process services. The global market will reach $1.82 trillion by 2024, nearly five-fold higher than when the final numbers come in for 2019.
Within this megatrend lies data center REITs; Equinix (EQIX), CoreSite Realty Corporation (CORE), Digital Realty (DLR), CyrusOne (CONE) and QTS Realty Trust (QTS) are the five go-to names in the sector.
As a group, they generate high single-digit-percentage revenue and double-digit-percentage earnings growth with a history of strong dividend gains.
Moreover, if bought in equal amounts, the fab-five of data center REITs sports a blended dividend yield of 3.35%, contending with utilities and consumer staples for highest defensive sector yields, but with much higher growth prospects.
So, while investors try to make heads or tails of global growth prospects, betting on the future of America’s biggest data center operators looks like a sure thing.
Jacob Kilstein, Argus Research
We are maintaining our “buy” rating on Public Storage (PSA); the company posted positive results in 2018 despite challenging economic conditions. The REIT, based in California, operates self-storage facilities.
It has 2,429 self-storage facilities in the U.S., with 162 million square feet of rentable space, and a 35% equity ownership in Europe, with 228 facilities and 12 million square feet of rentable space.
Lastly, the company owns a 42% interest in PS Business Parks (PSB), a public REIT that invests in office and industrial real estate, which owns 28 million square feet of rentable commercial space.
The company benefits from economies of scale (it is by far the largest storage company), brand recognition, and locations with high barriers to entry. It also acquires properties owned by other operators, and benefits from their presence in and knowledge of most major U.S. markets.
Although Public Storage shares trade at a premium to peers, we believe the premium is justified by the company’s consistent performance and long-term growth prospects. PSA also has the financial flexibility to fund both organic development and acquisitions.
In addition, the company has a record of steady dividend growth. Its annualized payout of $8.00 per share yields about 3.7%. The shares should also benefit from the recent pause in Federal Reserve interest rate hikes.
The company has little debt and a solid balance sheet. The company tends to fund its developments through private equity rather than debt to keep its leverage low. Overall, Public Storage appears on track to continue its strong performance through rent increases, a solid development and redevelopment pipeline, and accretive acquisitions.
Although I have generally not been a big backer of REITs over the years, I’m finding myself drawn to the sector at this time. One reason is that the interest-rate environment seems conducive for REITs, which tend to be sensitive to interest rates. Thus, a relatively flat interest-rate environment should work well for the group.
Also, REITs as a group have not exactly been big gainers over the last couple of years and seem due for a snap-back year. Finally, I think the market environment may get a little rocky in the near term, in which case REITs should see some support from investors searching for calmer waters.
Physicians Realty Trust (DOC) is a self-managed real estate company organized to acquire, develop, own, and manage healthcare properties that are leased to physicians, hospitals, and healthcare-delivery systems.
Healthcare real estate is likely to remain in demand given the aging of America and the need for greater access to health-care facilities. Yielding 4.9%, Physicians Realty has been performing well recently and offers a nice play in the REIT sector.
Among retailing REITs, Brixmor Property Group (BRX) has appeal. Brixmor owns and operates a national portfolio of open-air shopping centers. Its 425 retail centers comprise approximately 74 million square feet of prime retail space.
The company is a real estate partner to more than 5,000 retailers, including TJX Companies , Kroger , Publix Super Markets , Wal-Mart, Ross Stores , and L.A. Fitness. Yielding 6.2%, the stock should be one of the better REIT performers this year.
If investors want a simple way to diversify across a variety of REITs, the Vanguard Real Estate (VNQ) exchange-traded fund offers an inexpensive way to own a basket of REITs and real-estate-related securities. Note that the ETF does not offer a direct-purchase plan; purchases must be made via a broker.
MoneyShow.com: Get the 10 Best REITs to Buy for 2019 Here